The U.S. economy will begin to grow again in the second half of this year, but the breadth of the recession will lead to a slow recovery, according to a report released Wednesday by the Conference Board of Canada.

“Recent indicators suggest that the severe recession gripping the U.S. economy since late 2007 is slowly winding down,” says Kip Beckman, principal research associate.

“Canada was in a better position going into the recession and will post a comparatively stronger rebound in 2010. But the deep hole that the U.S. economy dug for itself means that a full recovery from the current recession will take several years,” Beckman adds.

Although growth is expected to resume in the second half of 2009, U.S. gross domestic product (GDP) will shrink by 2.5% for the year, the Conference Board forecasts. Modest signs of a rebound in the housing sector, along with evidence that household spending is starting to stabilize, are expected to produce real GDP growth of 1.8% in 2010, the independent research organization says.

Sales of both new and existing homes have rebounded in recent months because of lower interest rates and rock-bottom home prices that have enticed buyers back into the market. The major declines in consumer spending have also come to an end, and consumer confidence has partially recovered from the depths it fell to last winter. “However, spending will be restrained while Americans cope with weak labour markets and huge losses in wealth, and rebuild their savings,” the Conference Board says.

“Compared to the United States, Canada has healthier housing markets, labour markets and government finances,” it says.

The Conference Board forecasts real GDP growth of 2.7% in Canada next year. The organization says this relatively modest growth is due primarily to the sluggish recovery in U.S. consumer spending over the next few years.

IE