RBC ECOMOMIC OUTLOOK EXPECTS GOOD GROWTH AHEAD

TORONTO - Canada's economy grew at a moderate pace in the final quarter of 2011 and is expected to pick up steam in the year ahead, according to the latest economic forecast from the Royal Bank. The RBC Economic Outlook issued early today predicts Canada's real gross domestic product to increase by 2.6 per cent in both 2012 and 2013. It says burgeoning signs of strength in the U.S. economy, low interest rates, solid corporate balance sheets and elevated commodity prices are setting the stage for continued expansion. The pace of consumer spending eased to 2.2 per cent in 2011, from 2010's rapid 3.3 per cent rise. RBC predicts consumer spending this year and next will grow at a rate comparable to 2011, with durable goods accounting for about a quarter of the increase. Regionally, RBC expects western Canada to top the growth rankings in 2012, with Saskatchewan and Alberta leading the way and Manitoba close behind. Newfoundland and Labrador, British Columbia and Ontario are expected to grow at rates close to the national average. Quebec continues to experience some challenges and, along with the remaining Atlantic provinces, is positioned to grow below the national average. "Canada's economic growth clocked in at 2.5 per cent in 2011, shaking off a few speed bumps in the middle of the year and ending the fourth quarter with only moderate real GDP growth of 1.8 per cent," said RBC senior vice-president and chief economist Craig Wright. "The country's main engines of economic activity from the early days of the recovery — consumer spending and residential investment — are likely to play supplementary roles as the economy shifts into slightly higher gear on the road ahead." High commodity prices and strong balance sheets are expected to boost business investment's overall contribution to growth by just under one percentage point this year and next. As the U.S. economy grows, Canada will also benefit from improving demand for exports such as autos, machinery, and lumber. RBC forecasts real exports will return to the pre-recession peak level in 2013, but adds that an anticipated tightening in fiscal policy will likely have a restraining effect on economic growth.

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