Canadian Economic Outlook, February 2004: SwissRe

Economic growth will pick up in 2004 despite a mediocre fourth quarter last year. The economy was flat in November after only growing 0.1% in October. A strong December and healthy growth in the leading indicators, up 0.6% in January and about 0.8% in the previous four months, indicates that 2004 will be an improvement on 2003. Deteriorating external trade, hurt by the strong currency, however, will restrain growth. Recovering corporate balance sheets and rising profitability will support business investment, while job growth spurs consumer spending growth. These areas will steer the economy towards real growth of 2.8% in 2004 and 3.4% in 2005.

Though recent indicators have been lackluster, growth is expected to improve in 2004. Poor auto sales have
dragged down consumer spending growth. The housing market will benefit from interest rate reductions and job growth. Full-time job growth continued in January.

Higher interest rates in Canada have
contributed to the currency�s rise. The manufacturing sector is slowly improving. The Bank of Canada will cut rates at its
March 2nd meeting. The Canadian dollar will continue to
appreciate until the middle of the year.

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