Canada's fourth quarter growth rate of 3.3% hints of a robust pace to start 2011. Final domestic demand accelerated to 4.7% with healthy gains in all categories except housing construction. Exports posted a more than 17% annualized gain. Corporate profits are 16% above year ago levels, and businesses recorded an over 10% annualized gain in capital spending. Bottom line improvements generally trigger an acceleration in employment growth, so we expect that another 30,000 jobs will have been added in February.
Of course, none of this negates the potential headwinds that lie ahead. Government spending should decelerate with fiscal tightening, consumers will push the savings rate even higher as borrowing costs rise, and exports will feel the deceleration we expect in the global economy through 2011.
Still, Canada is in an enviable position to deal with all of these challenges compared to countries that rely on imported oil or have larger fiscal imbalances.
Interest rates likely to start climbing by July
While we expect growth to slow after such a robust first quarter, our expectation is that the Bank of Canada will begin raising interest rates by July.
Applying Your Tax Refund To Your Mortgage
If you're expecting a tax refund this year, consider using it to make a lump sum payment on your mortgage. You'll be surprised how even a relatively modest amount can have a big impact over time. Your mortgage broker can analyze your situation and show you exactly how much you can save in total interest costs by putting your tax refund to work in this way. Talk to your broker today.