The Canadian economy should outperform the US economy in 2007, helped partly by a pickup in exports to the United States later this year, Toronto-Dominion Bank's economics group said on Monday.
In its Quarterly Economic Forecast, TD Economics said the Canadian economy will expand at an annual average pace of 2.4 percent in 2007, slightly slower than in 2006, while the United States will experience a bigger slowdown.
The report said vulnerable areas for the Canadian economy will still be those with exposure to external demand, and that recovery in the export sector will be limited by softer US demand. "However, as prospects in the US economy improve later this year, so too will the fortunes of Canadian exporters and the Canadian economy," Don Drummond, TD Bank's chief economist, said in the report.
TD Economics also said the Canadian currency should stick closely to current levels and that manufacturers will not have to worry about new pressures coming from the Canadian dollar, which is well above the 15-month low it touched in February.
At 11.15 am (1515 GMT), the Canadian dollar was at C$1.1616 to the US dollar, or 86.09 US cents. TD Economics said it does not expect the Bank of Canada to alter its current 4.25 percent overnight interest rate for the rest of 2007. It said the cooling of the Canadian economy should help bring inflation down to the Bank of Canada's target level of the midpoint between 1 percent and 3 percent the end of the year. Core inflation was running at 2.4 percent in February.