The Canadian economy can recover without any additional fiscal stimulus, although growth will likely be slow, says an economist at Moody’s Econonomy.com.

“We maintain the view that near-term growth will be sluggish as high unemployment and falling incomes weigh on the economy. However, barring an unforeseen shock, there is no need for another fiscal stimulus, especially if tax cuts are maintained, as prime minister Harper has promised,” said Jimmy Jean of Moody’s Economy.com in a research note.

Jean said that the surge in home sales since the spring and the stabilization of retail sales, “suggest that extremely accommodative monetary policy is paying dividends”. Consumer and business confidence is also on the rise he noted, pointing to recent survey results.

“A crucial factor supporting a faster consumer recovery in Canada than in the U.S. is the smaller decline in household wealth. Canadians’ household net worth was down 6.5% on a year-ago basis in the first quarter, a significant decline but much milder than the 16% drop in the U.S.,” Jean added.

IE