As the loonie falls to the lowest levels in 11 years and Canada’s economy struggles to turn over, the American economy seems to be headed in the opposite direction.
A revised estimate of the United States’ gross domestic product (GDP) for the second quarter boosted the previously reported 3.7% increase to 3.9%. Growth came mainly from higher consumer spending and increased investment from both businesses and individuals.
Analysts are predicting overall growth of 3% for the U.S. economy in 2015.
In comparison, Canada’s GDP is expected to grow just 1.2% this year, following an economic contraction in the first half of 2015 as fallout from the oil price plunge continued. A TD report released earlier this week forecast the Canadian economy will grow nearly 2.5% in the second half of the year.
In a September 24 speech, U.S. Federal Reserve Chair Janet Yellen indicated a rate hike sometime in 2015 would be “appropriate.” In a note today, RBC economist Paul Ferley said RBC is forecasting December 2015 for that expected increase. Analysts had previously expected an announcement on an interest rate hike this September, an expectation that evaporated following market turbulence in the summer and signs China’s economy has weakened.
While the Canadian dollar fell below US$0.75 on September 24, the American dollar rose following Yellen's comments.
The Canadian economy has been hit hard by falling commodity prices, caused in part by declining demand from China. But a stronger American economy should be good news for Canadian sectors that benefit from a low dollar, such as manufacturing and tourism.
@jenstden
