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CIBC sees slower global, Canadian economic growth

A photograph of the CIBC sign in Toronto's financial district in downtown Toronto on Thursday, Feb. 26, 2009.

NATHAN DENETTE/The Canadian Press

CIBC estimates Canadian economic growth slowed to 1 per cent in the second quarter, but it expects the pace to pick up in the second half of 2011.

The bank is forecasting Canada's annual growth rate for 2011 will be 2.7 per cent, slipping to 2.6 per cent next year. That's down from 3.2 per cent annual growth in 2010.

CIBC's forecast comes a day before Statistics Canada is set to release its report on gross domestic product for April, the first month of the second quarter that ends Thursday.

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The bank also says the global economy hasn't been as robust as previously expected, due in part to the Japanese tsunami and other unforeseen problems.

CIBC has lowered its outlook for global economic growth to 3.8 per cent this year and 3.9 per cent in 2012.

The bank says that's about half a point below estimates from the International Monetary Fund.

"The train hasn't come completely off the rails, but the global economy has seen some serious braking action in the first half of 2011," Avery Shenfeld, CIBC's chief economist, writes in a report released Wednesday.

"We expect generally weak growth readings to roll out in the major developed economies for the next couple of months. Growth in the U.S. second quarter should, nevertheless, be no worse than Q1's 1.9 per cent disappointment."

CIBC said Mr. Shenfeld's downgrade of his second quarter forecast for Canada is driven by a downward revision by Statistic Canada of its prior net export report.

Statistics Canada delivered a double dose of negative news early this month, reporting June 9 that the country had a trade deficit in March - not a surplus as previously reported - and an even bigger trade deficit in April.

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The increased deficit was primarily due to a 1.9 per cent plunge in exports, slightly offset by a 0.6 per cent decline in imports.

April's international trade deficit was $924-million, more than double the $417-million experienced a month earlier. The revised figure for March compared with a $627-million surplus that Statistics Canada had reported on May 11.

Mr. Shenfeld notes that exports entered the quarter with less momentum than previously reported and saw a further dip in April tied, in part, to supply disruptions from Japan.

Poor weather also delayed some seasonal retail spending that month, a trend that likely extended into a soggy and chilly May. Agriculture was also impacted by excess rain in the Prairies.

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