Canada's economic recovery slowed in the second quarter after a strong start to the year, with net trade accounting for most of the moderation due to weak external conditions weighing on exports and strong import growth. However, domestic economic activity is being sustained by stimulative monetary and fiscal policies, and growth is expected to hover between 3-4% in 2010 and 2011, supported by a strengthening job market and consumer spending. Commodity prices are also expected to support growth in Canada's resource sector.

1. Who said the recovery would be easy? Outlook for Canada’s Economy ECONOMICS I RESEARCH Robert Hogue Senior Economist [email_address] Transportation Strategy: Planning for 2011 in Uncertain Times Mississauga, September 14, 2010

2. Canada’s recovery hits a bump After stellar start to year, growth slows down in second quarter

3. Once again, uncertainty is coming from abroad Net trade accounts for most of the Q2 growth moderation

4. European debt crisis shook confidence earlier this year… Greece’s troubles unsettled markets

5. … then the U.S. economy hit a soft patch Housing, labour data have disappointed south of the border

6. Weak external conditions weigh on Canada’s exports Meanwhile, imports are bouncing back quite strongly

7. At home, the domestic economy maintains a good pace Activity sustained by very stimulative policy

8. Going forward, policy will continue to provide support While rising, Canadian interest rates will still be very low

9. Inflation is under control Expectations well anchored at the 2% Bank of Canada target

10. Strong fiscal stimulus Infrastructure spending cresting this year

11. Job market will improve further… Unemployment rate to trend lower

12. … keeping Canadian consumers shopping Although consumer spending growth will be moderate

13. Despite recent setbacks, global economy is growing… Multi-speed recovery is under way

14. … boosting demand for commodities Supporting growth in Canada’s resource sector

15. Oil prices to rise modestly

16. U.S. economy will pick up pace Still many challenges ahead but no double-dip in the cards

17. Canada’s recovery will be sustained Growth to hover between 3% and 4% this year and next

18. Canadian dollar to gain some altitude Expected to test parity again by the middle of next year

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