The bank (TSX:CM) said Wednesday it now expects economic growth of only 1.7 per cent in 2013 — down from its previous forecast of two per cent.
"Having earlier tapped fiscal stimulus and a housing boom to shelter the economy from sluggishness abroad, the country's ability to set its own course is now much more limited," Avery Shenfeld, the bank's chief economist, said in a report.
"Escaping economic mediocrity will depend on the kindness of strangers, with exports and related capital spending critical to Canada's fate in 2013-14."
CIBC bases its somewhat bleak assessment on significant headwinds that continue to buffet the global economy.
"It's too early to get the full benefits of policy stimulus in Asia, Europe is too stubborn to soften its fiscal drag enough and amplify ECB bond purchases and Washington is too wedded to getting going on fiscal tightening stateside, if not the full fiscal cliff," Shenfeld said.
While Chinese GDP could show improvement towards an eight per cent pace as early as the end of this year, it is not likely to have much of an impact on other economies as Chinese imports are currently showing no growth at all on a year-over-year basis, he added.
As a result, Shenfeld expects a delay before crude oil and other resources rebound in price.
"The absence of a helping hand from abroad will leave Canada exposed," he said.
"Blaming temporary disruptions in energy production in Q3 for recent disappointments misses the point: GDP excluding resource extraction has also been decelerating (and) the loss of home building momentum will offset greater oil output."
Meanwhile, he says high household debt and moderate growth in real incomes will limit domestic consumption while governments are being hit by leaner than expected coffers due to downward revisions to nominal GDP. Governments, he noted, will be introducing further spending restraints or tax hikes for fiscal 2013.
However, Shenfeld does expect things to pick up in 2014, with economic growth in Canada hitting 2.5 per cent, led by recovery south of the border and a strengthening Chinese economy.
"With its household sector healing, the U.S. should be positioned to lead the way towards a better year come 2014 if, as we expect, new fiscal tightening measures do not hit as deeply that year."
Shenfeld said that as U.S. housing recovery gathers steam it will drive related consumer spending in addition to actual home-building jobs.
He also expects that by 2014, China will be feeling the full benefit of its own policy easing and the improvement in U.S.-bound exports.
"Even Europe, if it finally recognizes the need for both a softer hand in fiscal tightening and a more aggressive central bank, might at least register positive growth at that point," he said.
On a related issue, Shenfeld believes interest rates will hold steady in Canada through 2013 but that Bank of Canada governor Mark Carney's successor will nudge rates up 50 to 75 basis points in 2014. Carney is leaving Canada's central bank to become the next governor of the Bank of England in July.
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