BMO: Auto sector recovering; high loonie still poses problems

The Bank of Montreal’s 2010 economic forecast predicts the Canadian economy will grow this year and next — and in Central Canada, it expects manufacturing to lead the way.

According to the Provincial Outlook report issued by BMO Capital Markets Economics, the country’s growth is predicted to reach 3.4 percent in 2010 and 3.1 percent in 2011 — a strong rebound from the 2.5 percent decline in 2009. Western Canada is expected to lead the way as commodity prices rebound and investors respond to increasing oil prices.

In Central Canada, the recovery is "well underway" — primarily due to a rebound in the auto sector. Auto production has rebounded from the depths of the recession and it — along with other manufacturing sectors — are expected to make up for the slowing housing market. The bank does note that a strong Canadian dollar, combined with governmental fiscal restraint due to Ontario’s large budget deficit, will likely lead to below-average regional economic growth of slightly less than three percent per year through 2011.

Atlantic Canada is expected to remain stable, due largely to government stimulus in various projects. BMO does expect some of the region’s private sector projects to wind down in the next few years and this, combined with an ongoing challenge in the manufacturing sector, will lead to below-average growth of about 2.5 percent  per year through 2011.