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TD says business will have to drive Canada's growth

Published by Steve Coleman on April 16, 2012

The TD Bank is predicting business spending will have to remain Canada's main economic driver until at least 2015.

Even with consumer debt creeping closer to the hazardous range and outside influences posing a potential problem to the economy's health, the TD is still saying there's no reason for the Bank of Canada to raise interest rates any higher than they are now.

"With continued threats to Canadian economic growth from abroad, the Bank of Canada is likely to remain cautious in raising interest rates over the next several years," says an April 16 look at the next three years. "We expect the overnight rate to remain on hold at one per cent until mid 2013. The rate is expected to move up slowly from there, reaching 2.5 per cent by the end of 2014 and 3.25 per cent by the end of 2015."

Household debt levels reached 151 per cent of income by the fourth quarter of 2011. Both the US and the UK got into trouble when people owed 160 per cent of what they made in a year. If consumers cut spending and try and stash more into savings, businesses - who do have strong balance sheets - will have to pick up the slack for strapped consumers.

South of the border, TD predicts real GDP growth to fall into the 2.2 per cent range in 2012, increase to 2.4 per cent in 2012 and hover in the three per cent range in both 2014 and 2015. If it holds true, unemployment in the US should fall to an average of 6.2 per cent by 2015, TD says.

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