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Rob Friedman/Getty Images/iStockphoto

Douglas Porter, deputy chief economist at BMO Nesbitt Burns, has produced what he calls his "Five Fearless Forecasts" for 2012: Despite some anxious times in the latter half of 2011, he sounds surprisingly upbeat on the year to come.

1. He's using the "D" word – as in, the North American economy will decouple from Europe's. Europe's economy will contract 1 per cent in 2012, which actually isn't so bad next to the 4 per cent slide in 2009. But North America will avoid the worst.

"The most encouraging development in recent months is the ability of the U.S. economy to gather modest momentum in the face of Europe's deepening woes," Mr. Porter said in his note. "There have been episodes in the recent past where the U.S. has managed to rise above serious problems in other major economies – the Asian crisis in 1997/98 and European recession in 1993."

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Still, growth isn't expected to be anything great. He believes the U.S. and Canadian economies will expand by just 2 per cent next year, which isn't enough to help jobless rates.

2. Great expectations on U.S. housing: Yes, it has been a drag on the U.S. economy for some time, but that should shift in 2012, with the housing sector adding to growth. "Homebuilder sentiment is slowly improving, home sales are creeping off the bottom, and rising rents are spurring construction of multiple-unit buildings," he said.

3. The Bank of Canada will keep its hands off interest rates, leading to the longest period of inactivity (at least 28 months) since the 1950s. If the bank does meddle, he thinks the odds of a rate cut are greater than for a rate hike. "Given the sluggish external growth backdrop and a tapped-out domestic consumer, as well as a Fed that seems more biased to ease further than ponder rate hikes in the next 18 months, we see the Bank of Canada on hold through 2012," he said.

4. China's trade surplus will narrow. China is being affected by declining inflation pressures and a slowing global economy. He expects some easing of monetary policy next year.

5. Vancouver will lose its status as Canada's hottest housing market, replaced by Calgary and Edmonton. "Assuming oil prices hold around $90 or better, look for those two cities to lead the way for hottest housing markets in 2012," Mr. Porter said.

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