CIBC Drastically Cuts U.S. and Canadian Outlook for 2011: Will Be The Great Dissapointment

CIBC World Markets slashed its outlook for economic growth in Canada and the United States and issued a warning to be prepared for the “Great Disappointment” of a dismal recovery that will stretch through 2011.

The report is available here.

Outlook for 2011 was cut to 1.9% growth from 2.5%, while scaling back its U.S. target to a “paltry” 1.8 per cent from 1.9%.

CIBC's chief economist Avery Shenfeld says: “The Great Recession that shattered global growth in 2008-2009 is now water under the bridge, but the Great Disappointment of a sub-par global recovery will be with us for a good while longer,”

He predicts that the Bank of Canada will keep interest rates steady until next spring, after raising its overnight lending rate to one per cent through three consecutive 25-basis-point hikes between June and this month.

Canada’s exports will be hurt by a sluggish global recovery and a strong Canadian dollar, while the domestic economy will be held back by falling house prices and reduced use of credit that could trim spending growth, the report said.

U.S.

“Despite the potential for tax cuts and modest growth initiatives, the U.S. economy will still see a major drag on growth, intensifying early next year from the loss of earlier stimulus measures,”

He expects the picture to brighten late in 2011 as fiscal and consumer headwinds lessen.
Global economic growth is now forecast to come in at 3.6% in 2011, down from the previous estimate of 3.7%, well below the five per cent annual growth recorded in the four years prior to the recession.