TORONTO (Reuters) - Canada's growth outlook has darkened in the last three months, a Reuters poll showed on Thursday, hurt by weaker demand for the country's exports and the stumbling U.S. recovery next door.
The poll of 23 economists, taken in the past week, showed they have cut growth forecasts for the last two quarters of 2012 and first two quarters of next year.
The Canadian economy is now expected to expand just 2.0 percent this year and next, down from 2.1 percent and 2.2 percent respectively seen in a July 19 Reuters poll.
"The numbers we're seeing out of the U.S. are suggestive of a poor third quarter trade performance for Canada," said Ryan Brecht, senior economist for North America at Action Economics, citing data on industrial production, services, retail sales and automotive activity.
Canada's trade deficit hit a record high in July, the last month for which data is available, hurt by persistent weakness in the United States and Europe.
Its third-quarter growth is now expected to come in at an annualized rate of 1.7 percent, down from the 2.0 percent forecast three months ago. A forecast of 1.9 percent for the fourth quarter is also below the 2.1 percent seen previously.
This would be in line with the subdued pace of the first and second quarters.
The poll suggested the third quarter will represent a low-water mark for growth, with the pace picking up to 2.0 percent in the first quarter of next year and 2.2 percent in the second.
"It's more of a quarterly blip as opposed to the start of a trend," said Craig Alexander, chief economist at Toronto Dominion Bank.
Still, the poll showed the market is more bearish about the growth outlook than the Bank of Canada and finance ministry, which are both forecasting growth of 2.1 percent this year and a stronger pace in 2013.
The International Monetary Fund said on Monday Canada's economy would grow 1.9 percent this year and 2.0 percent next.
HOUSING STARTS TO FALL
The Reuters poll showed analysts raised their 2012 housing starts forecast slightly to 211,000 units. Starts are seen declining to 187,000 the following year.
Unlike its struggling U.S. neighbour, Canada's housing market boomed following the recession on the back of record-low borrowing costs. But recent government efforts to cool the market appear to be biting.
A report out Tuesday showed housing starts fell to a seasonally adjusted annualized rate of 220,215 units in September.
The poll also showed that inflation expectations have dropped, with consumer prices seen up 1.7 percent in 2012 and 2.0 percent in 2013 compared with 1.9 percent and 2.0 percent respectively in the previous poll.
Core inflation, which excludes some of the more volatile items, is seen at 1.8 percent in 2012 and 1.9 percent next year, down from the 2.0 percent seen both years in the July poll.
The forecasts suggest the Bank of Canada, which targets a 2.0 percent inflation rate, is less likely to act on its threat to tighten policy.
The poll showed economists do not expect the central bank to raise interest rates until the last quarter of 2013.
The Bank of Canada's main policy rate has been at 1.0 percent since September 2010. The bank was the first in the Group of Seven wealthy countries to tighten after the last recession, but halted in response to the euro zone debt crisis.
Canada's current account deficit is expected to have narrowed to C$15.4 billion (9.8 billion pounds) in the third quarter, the poll showed. It ballooned out to C$18.37 billion in the second quarter, its second highest level, hurt by lower energy exports.
(Editing by Jeffrey Hodgson. Editing by Jeremy Gaunt.)