The resurgent U.S. economy will be the world's "engine of growth" this year, according to an updated forecast from Export Development Canada.
Even as weakness in the euro zone undercuts the global recovery, EDC predicts that accelerating growth in the United States (and Japan) will help faster-growing emerging markets hold on to much of their current momentum.
As a result, Canada's export-financing agency sees the world economy growing 3.7 per cent in 2012, slightly better than EDC's new 3.5-per cent estimate for 2011. Both figures are down from EDC's fall of 4.3-per cent growth this year after 3.7 per cent in 2011.
"Many risks still cloud the outlook, but the recent, steady and broad-based increase in U.S. economic activity is a key development that suggests the U.S. will be the world's engine of growth in 2012," said Peter Hall, chief economist at the Ottawa-based EDC. "U.S. growth is happening in spite of the predictions of most and it is occurring in a context of widespread world weakness."
Canadian exports, meanwhile, will grow at a slower pace this year than in 2011, EDC said, at 6 per cent instead of 11 per cent.
But that's mainly because of lower commodity prices as demand from developing nations like China and India slows. And while that will hurt resource industries and Canada's overall trade numbers, it will actually puts exporters of other goods in decent position to benefit from a strengthening U.S. economy, EDC said, because weaker prices for oil and metals will restrain the loonie.
"An important upside is that price weakness will keep a lid on the Canadian dollar, forecast to hover in the 98-cent (U.S.) range," Mr. Hall said in a commentary. "This, together with rising production and decent emerging market growth, will power sales of higher-value Canadian exports."
Mr. Hall has been one of the more optimistic forecasters out there and, as he acknowledges, there are many risks to his outlook, ranging from the European debt crisis and fiscal constraints throughout the advanced economies to a drying up of financing even for "promising projects." As far back as July, Mr. Hall argued the U.S. economy was on the verge of a renaissance. That proved to be wishful thinking.
However, the relatively consistent stream of improving economic data from the U.S. suggest that, this time, Mr. Hall is really on to something.
The EDC's prediction Thursday that rising activity in U.S. housing will help Canadian forestry exports gain 12 per cent in 2012 may be overly optimistic; the depressed American real-estate market has likely bottomed out, but a Wednesday from Eric Lascelles of RBC Asset Management outlines the many reasons why "a very gradual multi-year recovery is still more likely than a quick leap higher."
And the consumer spending that makes up about 70 per cent of the U.S. economy took a bit of a step back in December, according to figures released Thursday by the U.S. Commerce Department.
Still, economists at National Bank Financial in Montreal point out that December capped a three-month period which saw the biggest gain in U.S. retail sales volumes in a year, and the highest increase in "discretionary" spending since the first quarter of 2006 -- at almost 11 per cent on an annual basis.
With the labour market showing signs of life in recent months, too, the U.S. could really, finally, be back on its feet.