With commodity prices topping out and dimming prospects for global growth, Canada will be hard-pressed to maintain its superior economic performance, according to the Canadian Economic Review and Outlook, 2011-2012, an annual report from the Manufacturers Alliance for Productivity and Innovation (MAPI).

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As the only G7 member that has fully recouped its GDP and employment losses sustained during the downturn, Canada has led the economic recovery among industrialized nations. The G7 is composed of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.

In the report, Jeremy A. Leonard, MAPI economic consultant and report author, notes that annualized GDP growth was a higher-than-expected 3.5 percent in the third quarter of 2011, but weakening labor markets and export demand will reduce quarterly annualized growth to the 2 percent range in 2012.

\”Real GDP growth in Canada is expected to be 2.2 percent in 2011 before decelerating to 1.9 percent in 2012, with slowing growth in domestic demand being the primary issue,\” Leonard says. \”In addition, if the prospect of a significant European double-dip recession materializes because of an inability to contain the sovereign debt crisis, the ripple effects on both the United States and Canada will be considerable.\”

Canada’s manufacturing sector faces severe cyclical and structural problems, and growth will likely be little more than 2 percent in 2012. MAPI expects the manufacturing recovery will continue to be uneven, with stronger growth in two key durable goods industries that feed into capital equipment (machinery, anticipated to grow 7.6 percent in 2012 and 7.4 percent in 2013, and fabricated metals, with 5.8 percent growth in 2012 and a 6.3 percent advance in 2013) and one nondurable goods industry (chemicals, with 5.8 percent growth in 2012 and a 7.5 percent increase in 2013).

In a forecast of selected economic indicators for 2012, pre-tax corporate profits are expected to grow by 5 percent, exports to increase by 4 percent, and imports to increase by 3.5 percent. Consumer spending is anticipated to grow by 2 percent, and disposable income should increase by 3.6 percent in 2012.

The labor market appears to be weakening, as the national unemployment rate increased from 7.1 percent in October 2011 to 7.4 percent in November.

Commodity prices are also a concern.

\”Commodity prices are likely to continue to ease somewhat into 2012, adversely affecting terms of trade and sapping domestic purchasing power,\” Leonard said.