Such treading water will persist for some time since private domestic demand is still not sufficiently robust to outweigh an aggressive fiscal tightening. The Bank expects the U.S. expansion to average 2.5 per cent over the next few years (compared to 3 per cent in the decade prior to the crisis). Bottom line, the U.S. economy is not what it used to be.
With less capital investment and more structural unemployment, even once the U.S. economy recovers its cyclical losses, the Bank estimates that it will remain over $ trillion smaller in 2015 than we had projected prior to the crisis. Already, U.S. weakness means that Canadian exports are $ billion lower than they would normally be at this stage in the cycle.