Economic growth to slow from oil prices, not rate increases
08 October 2004 - 1:54AM
PR Newswire (US)
Economic growth to slow from oil prices, not rate increases
TORONTO, Oct. 7 /PRNewswire-FirstCall/ -- The long anticipated rise
in interest rates may be coming to an early and abrupt end as the
spectre of a sustained $50 per barrel oil prices lead to a slowdown
in North American economic growth next year according to CIBC World
Market's Economic Forecast. "As the world's largest importer of
crude, all of a sudden prospects for the once hot US economy don't
look so hot anymore," says CIBC World Markets Chief Economist Jeff
Rubin. "And just as suddenly, the hundreds of basis points of
central bank tightening that investors had braced their portfolios
for are rapidly being priced out of the market. Instead of losing
momentum along an arduous march to higher interest rates, the North
American economy will soon be feeling the brake of soaring energy
prices." The CIBC World Markets forecast expects burgeoning Asian
demand coupled with conventional supply depletion will keep oil
prices above $50 per barrel for at least the next three quarters,
and possibly longer depending on how long it takes sharply rising
energy prices to quell world growth. "The run-up in oil prices is
neither benign nor temporary," says Rubin. "With OPEC spare
capacity at record lows and world crude demand growing at three
times its long-run average, $50 per barrel crude prices are here to
stay, at least as long as the US and Chinese economies continue to
power robust growth." Rising oil and natural gas prices will create
a revenue bonanza for Alberta, which could see provincial oil and
gas royalties double over the next year. And $50 per barrel oil
prices are likely to trigger more investment in the increasingly
strategic tar sands. But high energy prices will be a significant
drag on economic growth in central Canada, where much of the
country's energy-intensive manufacturing is housed. Exporters will
face the additional challenge of a strong Canadian dollar,
supported by higher interest rates in Canada than in the United
States and by surging energy prices. The loonie is expected to peak
at just over 80 cents early next year and trade in the 77-80 cent
range over the balance of next year. CIBC World Markets' Economic
Forecast is available at http://www.cibcwm.com/research. CIBC World
Markets is a leading North American investment bank with niche
capabilities in the U.K., Australia and Asia. CIBC World Markets
delivers innovative full capital solutions to growth-oriented
companies and offers advisory expertise across a wide range of
industries, and provide equity and debt research. CIBC World
Markets' parent company is CIBC, one of North America's first and
largest financial institutions with offices in 18 countries,
including the world's major financial centers. DATASOURCE: CIBC
CONTACT: Jeffrey Rubin, Chief Economist and Managing Director, CIBC
World Markets at (416) 594-7357, or Rod Cumming, Senior Manager,
Marketing and Communications, CIBC World Markets at (416) 594-7774
or ; Archived images on this organization are available through CNW
E-Pix at http://www.newswire.ca/. Images are free to members of The
Canadian Press.
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