While B.C. and Ontario are expected to be among the fastest growing economies in Canada this year, the highest economic growth is expected in the Prairies in 2011.
According to TD Economics’ quarterly forecast, B.C.’s real GDP is expected to rise 3.8% this year. Rebounding U.S. demand, a robust housing market in the first half of 2010 and the economic spillover effects of hosting the 2010 Winter Olympic Games have contributed to B.C.’s substantial growth, which is second only to Ontario’s 4% projected GDP growth this year.
But B.C.’s economy is expected to grow only 2.5% in 2011, due primarily to a slowing real estate market and dampened consumer spending.
The report suggests consumers have been increasing spending faster than matching increases in income, leading to higher household debt. The report said nationally, household debt reached 1.5 times personal disposable income and the personal savings rate, which increased to 5% during the financial crisis, has fallen to 2% in the first quarter.
Moderate increases in the number of jobs, leading to a reduction in unemployment, however, is expected to keep consumer spending up around 2% next year. B.C.’s unemployment is projected to fall to 7.1% in 2011, down from 7.5% forecast for 2010.
Spending will be dampened, primarily by rising interest rates on household debt. TD forecasts the Bank of Canada’s overnight rate to rise to 1.5% by the end of the year and to 3% by the end of 2011.