With exporters struggling, BoC says economy not growing as fast as thought

OTTAWA – A senior Bank of Canada official says the economy isn’t growing as quickly as expected and may take longer to reach its potential.

The central bank’s senior deputy governor, Tiff Macklem, says expectations of a big bounce in the just completed third quarter now likely won’t happen, hinting that next year may also prove weaker than previously thought.

The bank won’t issue an official new forecast until the release of its policy report later this month, but Macklem is giving a sneak preview of its new thinking.

He says the 3.8 per cent bounce that the bank had expected in the three months ended Sept. 30 will be more subdued, probably ranging at between 2.0 per cent and 2.5 per cent.

The bank now also expects the fourth quarter from October to December to be in the same range, a slightly weaker outlook than the firm 2.5 per cent expansion projected in July.

Macklem says the main reason for the downward revisions is that the export sector continues to struggle in the face of weak global demand and competitive challenges, while the domestic economic expansion is running out of steam.

He says the bank has long looked to a rotation from domestic demand to export strength to underpin the Canadian economy going forward, but the transition is taking longer than expected.

That may also put in jeopardy the bank’s 2014 forecast of 2.7 per cent growth, which many already economists consider too rosy.