The bank’s economists have downgraded their forecast for growth for 2015 to 1.2% (from a June estimate of 1.8%). For 2016 they expect 2.2% (down from 2.6%). However, talk of recession is “misplaced,” the report says.
On household debt, chief economist Craig Wright said: “Along with an increase in spending, Canadians continued to take advantage of low borrowing costs during the first half of 2015, with household debt balances rising at the quickest pace in more than two years.
"That said, historically low interest rates and, to a lesser extent, sustained income gains have kept the costs to service these debt balances at a record low.”
For the housing market the mortgage lender is optimistic. Low interest rates continue to stimulate demand in 2015, despite oil price declines and a glut of condos in some areas.
The market is not performing well universally though and the report highlights Alberta and Saskatchewan’s falling sales.
Overall, though home resales at the national level are expected to rise by 5% in 2015, making it the second-highest level on record, with home prices to rise by 4.6% in 2015, little changed from 4.8% in 2014.
With interest rates expected to rise in 2016, RBC anticipates that there will be a slight easing in resale activity, slowing to 3.2%.
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RBC has published its latest Economic Outlook in which it highlights the challenges that Canada faces, including those from other economies.