I'll start briefly. We are expecting a relatively significant price adjustment in houses in Canada this year, in the high single-digit order of magnitude. It's under way, and it's concentrated largely in western Canada. A lot of progress has been made there. What we've seen is a slowdown in starts in Canada such that they're running below.... Currently the demographic rate of household formation would be around $170,000 to $175,000. So you're getting that stock adjustment happening in Canada.
What you've seen in the United States, as everyone is painfully aware, is that housing starts, after running above trend, have dropped to a level significantly below trend, below 600,000 units. When you think about that gap that started to open up, even with the overhang of foreclosures and the difficult financing conditions.... Now that U.S. authorities are starting to make real progress on lowering mortgage rates there--I referenced 3% earlier, and they're trying to get things down below 5%--they are having some success. In our opinion, that's going to start to impact increasingly house purchase activity in the United States as the year goes on and into 2010, and it will provide a measure of stabilization there.
I would make a basic point about the United States that is sometimes easy to ignore. The first thing is for housing starts in the U.S. to stop falling. It's been subtracting a percentage point from growth for some time in the United States. We're now getting down to extraordinarily low levels, and we'll start to see that adjustment. We also expect to see some adjustment in the auto sector.
If I could draw committee members' attention to page 21 of the report, in chart 17 there the blue line shows U.S. GDP outlook; once it gets into the dots, it's our forecast. The green line, which is trade-weighted activity in the U.S., is important. For the sectors of the U.S. economy that are important for Canada, you see the big gap that opens up, 2007 into 2008, and then you see our view as you start to get some of these stock adjustments. The U.S. growth doesn't get up too much, but U.S. activity in housing, autos, while not skyrocketing, starts to come back towards equilibrium and outside impact on Canada. That's one of the reasons we see 2.5% growth in Canada next year as opposed to a lower level.