Significant Changes in the Consensus - March 10, 2008

In Canada, the release of the national accounts has provoked noticeable - and contrasting - changes to our panel's 2008 forecasts. The 1.8% (q-o-q) acceleration in personal expenditure during the final quarter of 2007 helped to fuel car sales and services sector activity. This, coupled with another gain in employment payrolls in February and the calm inflation picture, has prompted an upgrade in consumer spending expectations from 3.2% to 4.1%. By contrast, industrial production estimates have fallen steeply. Manufacturing has not recovered from last year's slump, and fears of a US recession have compounded the depressed outlook for export-oriented industry. Indeed, with the C$ strengthening against the US currency, our panel now predicts a sharp retrenchment in the sector. In spite of solid domestic demand fundamentals, Canada's exposure to the US downturn is such that GDP growth expectations for 2008 have tumbled.