Economic growth to slow from oil prices, not rate increases

Economic growth to slow from oil prices, not rate increases 


TORONTO, Oct. 7  /PRNewswire-FirstCall/ -- The long anticipated rise in
interest rates may be coming to an early and abrupt end as the spectre of a
sustained $50 per barrel oil prices lead to a slowdown in North American
economic growth next year according to CIBC World Market's Economic Forecast.

"As the world's largest importer of crude, all of a sudden prospects for the
once hot US economy don't look so hot anymore," says CIBC World Markets Chief
Economist Jeff Rubin. "And just as suddenly, the hundreds of basis points of
central bank tightening that investors had braced their portfolios for are
rapidly being priced out of the market. Instead of losing momentum along an
arduous march to higher interest rates, the North American economy will soon be
feeling the brake of soaring energy prices."

The CIBC World Markets forecast expects burgeoning Asian demand coupled with
conventional supply depletion will keep oil prices above $50 per barrel for at
least the next three quarters, and possibly longer depending on how long it
takes sharply rising energy prices to quell world growth.

"The run-up in oil prices is neither benign nor temporary," says Rubin. "With
OPEC spare capacity at record lows and world crude demand growing at three
times its long-run average, $50 per barrel crude prices are here to stay, at
least as long as the US and Chinese economies continue to power robust growth."

Rising oil and natural gas prices will create a revenue bonanza for Alberta,
which could see provincial oil and gas royalties double over the next year. And
$50 per barrel oil prices are likely to trigger more investment in the
increasingly strategic tar sands. But high energy prices will be a significant
drag on economic growth in central Canada, where much of the country's
energy-intensive manufacturing is housed.

Exporters will face the additional challenge of a strong Canadian dollar,
supported by higher interest rates in Canada than in the United States and by
surging energy prices. The loonie is expected to peak at just over 80 cents
early next year and trade in the 77-80 cent range over the balance of next
year. 

     CIBC World Markets' Economic Forecast is available at
     http://www.cibcwm.com/research.


CIBC World Markets is a leading North American investment bank with niche
capabilities in the U.K., Australia and Asia. CIBC World Markets delivers
innovative full capital solutions to growth-oriented companies and offers
advisory expertise across a wide range of industries, and provide equity and
debt research. CIBC World Markets' parent company is CIBC, one of North
America's first and largest financial institutions with offices in 18
countries, including the world's major financial centers. 

DATASOURCE: CIBC



CONTACT: Jeffrey Rubin, Chief Economist and Managing Director, CIBC

World Markets at [phone], or Rod Cumming, Senior Manager, Marketing and

Communications, CIBC World Markets at [phone] or

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