Economy picking up steam, Royal Bank says

Canada's growth outlook appears to be stronger than previously thought, thanks to an improving trade picture and the strength of corporate balance sheets, economists at the Royal Bank of Canada said Wednesday.

RBC Economics raised its estimate for the country's 2013 economic growth to 1.9 per cent and says 2014 growth will be about 2.9 per cent.

RBC's estimates are higher than the Bank of Canada's most recent outlook for the 2013 and 2014 gross domestic product and also higher than several recent forecasts by private-sector and international economists.

As others have noted, RBC says the United States has been more resilient than anticipated in the early months of this year but it is more bullish than some others about what that means for Canada.

"The improving trade balance underpins our forecast for Canada's economy to grow at rates which should help propel the economy to full capacity in early 2015," said Craig Wright, RBC's chief economist.

"Stronger demand for autos, houses and industrial machinery from the U.S. will help sustain the lift in export growth that Canada experienced so far this year for the remainder of 2013."

Wright added that company balance sheets are healthy and will allow Canadian firms to invest in growth at an accelerating rate.

"After rising an expected 3.7 per cent this year, business spending will strengthen to 7.3 per cent in 2014," Wright said.

Canada's central bank lowered its 2013 growth forecast by half a point to 1.5 per cent in April and maintained that stance on May 29 when it announced its key lending rate would remain unchanged.

The Bank of Canada has also estimated 2014 economic growth will be 2.8 per cent followed by 2.7 per cent growth in 2015.