(Canadian Press)
The strong dollar is
continuing to weigh down Canadian manufacturers and will likely even hit the tourism sector this year, says Bank of Canada governor David Dodge.
Businesses seem to be coping with the changes sweeping
the global marketplace, but most growth will come from domestic demand by households and businesses, Dodge predicted in a speech Friday to the Ottawa Chamber of Commerce.
"Growth in
manufacturing can be expected to moderate, as the higher Canadian dollar dampens demand for made-in-Canada products," said Dodge.
That includes technology products from Ottawa's high-tech sector
as well as tourism and hospitality, he said.
"On the other hand, continued strong business and consumer demand can be expected to provide support to Ottawa's business services, software and
retail sectors."
The strong dollar makes Canada's exports more expensive to the world. And international visitors find their own currencies less valuable against a strong loonie.
That's
part of the reason the central bank recently trimmed its outlook for economic growth this year to about 2.6 per cent from previous expectations of just under three per cent.
The strong currency,
which closed Thursday at about 80.3 cents US, has been a big factor in weighing down exporters who are big contributors to overall gross domestic product.
That's part of the reason the Bank of Canada
has left its key policy interest rate unchanged at 2.5 per cent for the last several months.
Dodge didn't say much to Friday's breakfast audience about his plans for interest rates. But analysts have
said they think he'll likely wait until summer and possible fall before resuming tightening. The bank's next opportunity to raise rates comes May 25.
South of the border, the U.S. Federal Reserve has
been tightening every opportunity it gets and this week raised its key policy interest rate to three per cent.
Not every sector of Canada's economy has been hurt by the jump in the loonie's value in
recent years, taking it far above the 62 cents US range the dollar was trading in three years ago.
International demand for Canada's resources - especially oil and gas - have been a boon to some
parts of the economy.
That has been partly reflected in a healthy job market. Unemployment slipped to 6.8 per cent in April, down from 6.9 per cent the month before, Statistics Canada said Friday.
That's the lowest jobless rate since December 2000 as an estimated 29,000 jobs were added in April, offsetting jobs shed last month in manufacturing.
Dodge said one of the most important things the
Bank of Canada can do to support business is to keep inflation low and stable, between one and three per cent.
The bank adjusts interest rates to boost or cool growth, depending on what it expects
inflation to do.
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