N. American economies will 'decouple' from Europe

The North American and European economies will "decouple" next year, as Europe's gross domestic product will shrink while Canada and the U.S. grow, BMO deputy chief economist Doug Porter says.

BMO economist says Canada and U.S. will follow their own path

Jim Weiler works on a home under construction in La Porte, Ind., in November. Housing, which has reduced U.S. economic growth for six years, will make a contribution in 2012, BMO economist Doug Porter says. (Bob Wellinski/Michigan City News Dispatch/Associated Press)

The North American economy is going to follow its own path, independent of the turmoil in Europe, BMO deputy chief economist Doug Porter said Monday.

The economies will "decouple," he said in a news release. While Europe's gross domestic product will shrink by about one per cent in 2012 after growing 1.5 per cent in 2011, "North America will partly avoid the downdraft."  

Both the U.S. and Canadian economies will show "sub-par" growth of about two per cent next year, he predicted.

His 2012 forecast for Canada is about the middle of the range for bank economists. Their outlooks range from 1.7 per cent growth to 2.5 per cent.

The U.S. forecasts run from 1.8 per cent to 2.5 per cent.

Housing will boost U.S. growth after falling for six years, Porter said. Next year "residential construction is finally poised to add — albeit slightly — to U.S. growth."

U.S. consumer spending will increase more quickly than Canada's for the second year in a row as employment growth catches up to Canada's. With "plenty of pent-up demand, there is simply more runway for U.S. consumers," he said. 

Housing in Canada will ease, and Vancouver — the hottest market and even a bubble candidate — already shows "clear signs that sales are dipping, and price increases are starting to ebb."

Toronto may be at risk of overheating, while Calgary and Edmonton tie "for most well-behaved market." The two cities could become the hottest housing markets if oil prices hold around $90 a barrel or better, Porter said.