Sept 10 - The North American economy should grow 2 percent this year and improve through 2013, with a strong performance from residential building in the U.S. and commercial construction in Canada, according to the North American Outlook released by BMO Economics.
The modest growth of 2 percent for 2012 in the United States will pick up through 2013 amid improved household finances and a strengthening housing recovery. Growth is expected to reach 2.8 percent by the end of 2013.
"Home sales and starts have picked up from depressed levels, supported by record-low mortgage rates, pent-up demand and investor interest," said Sal Guatieri, senior economist, BMO Capital Markets. "House prices are rising, lifting household wealth and encouraging first-time buyers to take the plunge. Rising house and equity values should allow households to soon recover the rest of the $16 trillion in wealth that was lost during the Great Recession."
Other factors include:
Because of elevated unemployment, "we now expect the Fed will delay any rate hikes until mid-2015," said Mr. Guatieri.
"Further Fed easing should encourage the bank to hold overnight rates steady at 1 percent for somewhat longer than we previously thought, likely until autumn 2013," added Guatieri.
Guatieri noted that several risks to the North American economy remain, including a possible eurozone breakup, pending spending cuts and tax increases in the United States, a sharp correction in the Vancouver and Toronto housing markets and the potential for a hard landing in China.
About BMO Financial Group
For more than 193 years, BMO Financial Group has believed in community reinvestment and corporate and social responsibility in the communities it serves. In 2010, BMO contributed more than $54 million in donations, sponsorships and events in Canada and the United States to groups, organizations and programs that help build and sustain resilient, vital and healthy communities.
About BMO Harris Bank
Based in Chicago, BMO Harris Bank N.A. provides a broad range of personal banking products and solutions through over 650 branches and approximately 1,350 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Nevada, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. Deposit and loan products and services provided by BMO Harris Bank N.A. Member FDIC. BMO Harris Bank and M&I are trade names used by BMO Harris Bank N.A. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with 1,600 branches, and a retail deposit base of approximately $180 billion.