Canadian consumers seen scaling back as rates rise

* Conference Board says 2011 growth will slow to 2.9 pct

* Says rate hikes may be gradual due to uncertainty

* Says Canadian export recovery is underway

OTTAWA, July 14 (BestGrowthStock) – Canadian consumer spending will
have to slow to more sustainable levels this year, causing
economic growth to lose momentum, a report by the Conference
Board of Canada said on Wednesday.

The Bank of Canada will likely continue to raise interest
rates but the pace of monetary tightening may be gradual due to
uncertainty caused by European debt woes, soft U.S. demand, and
a strong Canadian dollar, which limits exports.

“Consumer spending has been outpacing income since the
recovery began in the third quarter of 2009,” the think tank
said in its latest outlook.

“While this has helped to get the economic ball rolling,
households will need to slow down their spending growth to
below income gains over the coming quarters,” it said.

Spending by homebuyers taking advantage of rock-bottom
interest rates and healthy retail sales helped lift the
country’s economy from recession in the fourth quarter of last
year, posting growth of 4.9 percent annualized. In the first
quarter of this year growth zoomed to 6.1 percent.

The surprising performance prompted the Conference Board to
raise its 2010 growth forecast to 3.6 percent in Wednesday’s
report from 3.2 percent previously.

It sees growth slowing to 2.9 percent in 2011 as fading
government stimulus spending and a slowdown in housing
construction is offset partially by a modest recovery in U.S.
household spending, which will boost demand for Canadian goods
such as cars and lumber.

Trade figures for May showed imports grew faster than
exports, a sign of heavy consumer and business spending.

The small trade deficit will continue to exert a drag on
growth throughout 2010, but the Conference Board argues an
export recovery is underway, “led by a surge in auto and parts
exports that is helping to resuscitate the manufacturing sector
in Canada.”
(Reporting by Louise Egan; editing by Peter Galloway)

Canadian consumers seen scaling back as rates rise