TORONTO – One of Canada’s big banks is cutting its economic forecast for the country for a second time in a matter of weeks.
CIBC World Markets is now estimating the country’s gross domestic product will grow by only 1.3 per cent this year, after adjusting for inflation.
That’s down from its previous forecast last month of 1.7 per cent growth in GDP.
CIBC chief economist Avery Shenfeld says a major concern is global investor sentiment, which has resulted in lower stock prices, changes on the bond market and a buildup of cash in Canadian households.
But Shenfeld warns against an “overdose on pessimism.”
A report by other economists in the same CIBC report said they expect a modest increase on commodity prices next year, following a “bit better” economic growth in 2016 and 2017 and reduced supplies of some commodities.
The decline in global prices for oil and other commodities produced by Canada was a major reason for CIBC’s previous economic downgrade for the economy, released in December.
“It’s unusual for us to want to reconsider a full-year outlook that we published only a month ago, but then again, these are unusual times,” Shenfeld said in the forecast released Thursday.
“While the country’s GDP is less heavily weighted to resource sector spending than it was a year ago, we’re only in the early stages of the negative spillover effects on other sectors.”
A separate report from Scotiabank said Thursday that its monthly commodities index dropped last month to a level that’s 21.3 per cent below the low point during the 2008-09 recession. As of December, Scotiabank’s main commodity index was at 83.5 points, down 4.9 per cent from the previous month.
Note to readers: This is a corrected story. A previous version attributed CIBC’s assessment of commodity prices to Avery Shenfeld, rather than other CIBC economists.