Canada's economy hit the brakes in the third quarter, falling from the 1.7 annual percent pace maintained during the first two quarters of the year to 0.6 percent as business investments and exports slumped. The central bank is forecasting that exports will increase gradually. However, they will continue to be restrained by weak foreign demand and the persistent strength of the Canadian dollar.
It noted that global inflationary pressures are subdued in response to persistent excess capacity, that Europe remains in recession and the US economy is being "held back" by fiscal cliff fears. Economists worry that if a deal is not reached in Washington to avert the "cliff" package of severe tax hikes and budget cuts slated for January 1, the world's biggest economy will tips into recession next year.