January 2004: The country's joblessness rate for 2004 ends at 4%

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Alright, so here's the summary: Canada's economy boomed between 2003 and 2007. The strong CAD led the Central Bank to lower interest rates in an effort to stimulate demand for Canadian goods (remember that 3/4 of the country's exports go to the US).
The global recession was late to hit Canada, but eventually, the country's economy suffered from the drop in US demand (especially regarding automobile sales).

January 2003: The Canadian economy is expected to grow nearly 3.2%; the federal government will post a surplus of $8.7 billion when FY 2002-3 concludes in March and $11.2 for the following FY. The Bank of Canada will maintain the bank rate b/w 2.25%-2.5% (1).

April 2003: the Canadian economy contracts for the first time since September 2001. The .2% dip in GDP is due to a decline in consumer spending (apparently there was a .8% decline in industrial production).
July 2003: The Canadian economy recovers and grows by a slim .1% in May due to an increase in automobile sales. The financial sector, in turn, expands as a result of the stock market's recovery while the real estate agent and brokerage industry benefited from a stronger resale housing market.
January 2004: The country's joblessness rate for 2004 ends at 7.4%
April 2004: the country lowers its rate to 2.25%, the fifth drop in the past year. The rate was 3.25 in April 2003. The Canadian dollar currently stands at 75 American cents, up from 62 American cents in 2002.
March 2005: During 2004, the Canadian economy grew 2.8%; however, the growth rate declined from quarter to quarter: the strong Canadian dollar hurt Canadian exports to America
December 2005: Canada's growth rate surged to 3.4% during 2005 due to US demand for automobile products.

April 2007: A few months before the financial crisis, Canadians were optimistic about the future of their economy: the economy was anticipated to grow 2.2% this year and 2.7% for the two follow years. Furthermore, inflation remained low at 2.3% and was expected to moderate

August 2007: As first, Canadian Banking Executives said that Canada would weather the recession just fine without governmental interference. The chief of economy analysis at Statistics Canada lauded the country for its health global trade, demand for its commodities, and its vibrant housing sector.
December 2007: The Bank of Canada cut its key interest rate by a quarter of a percentage point to 4.25%, the first interest rate cut since August of 2004. Economists suggest that the American financial woes have suspended U.S. demands for Canadian products. Canada's economy grows but only by .8%
March 2008: Bank of Canada injected over $4 billion into the Canadian economy to stimulate the economy.
May 2008: Canada's economy struck at .3% in the first three months of 2008, according to official reports.
July 2008: The government of Ontario--the country's most populous province--revealed that the pronvince's economy contracted .3% from January to March of that year. Just three months prior, economists had projected that Ontario's economy would grow 1.2%, and, and as the province accounts for nearly 40% of the country's economy, analysts speculated whether the rest of Canada was struggling.
Furthermore, in the wake of the global financial crisis, Canadian economists have had to lower their projections of the economy's growth in 2008 from 1.8% to 1%.
October 2009: The Canadian dollar's value against the dollar surged, closing around 96 American cents to the Canadian dollar (a 12-point increase from the end of June). Canadian official estimates point to the economy growing around 2.9% in 2010
December 2009: the Canadian Economy had crawled out of recession in Q3 of 2009 after three quarters of contraction, but its growth (+.4% in GDP) was considered 'subpar,' and its industrial production continued to decline. The economy was still 3.2% smaller than a year earlier. Analysts suggested that domestic spending was fueling the recovery

Canadian economy to grow by 3.2% in 2003: Conference Board

January 8, 2009

The Canadian economy will grow by 3.2 per cent this year, matching its rate of growth from 2002, the Conference Board of Canada said Wednesday.
"Strong consumer spending, helped by 2002's record employment growth, and anticipated new spending in the federal government's February budget should maintain Canada's economic growth at a solid pace in 2003," Paul Darby, director of economic forecasting at the Conference Board, said in a report.
"New spending in the budget will maintain job growth in the latter half of 2003, which will keep shoppers in the stores in spite of rising interest rates," Darby said.
The Conference Board expects the federal government will post a surplus of $8.7 billion when the 2002-03 fiscal year concludes at the end of March and $11.2 billion for 2003-04, allowing the federal government to spend in a number of areas.
The private research organization said it expects February's federal budget will have $5 billion in new spending – including $3.5 billion for health care, $1 billion to begin implementation of the Kyoto Protocol, and $500 million for defence.
The continuing growth in the economy is also expected to push inflation risks higher. The board forecasts that the threat of inflation will cause the Bank of Canada to raise the bank rate 2.25 percentage points between April 2003 and April 2004 to keep inflation under control at 2.5 per cent.
The research group said the most significant threat to the country's economic health remains a possible slowdown in the U.S. economy due to its lack of job creation in 2002. A possible war with Iraq presents another threat, the board said.
Canadian economy continues to shrink

June 28, 2003

TORONTO -- The Canadian economy contracted in April, the first time it has shrunk month-to-month since the Sept. 11, 2001, terrorist attacks in the United States, Statistics Canada reported yesterday. The decline came as consumers lost their appetite for travel, new cars and houses in April, causing an 0.2-per-cent dip in gross domestic product, a key measure of economic activity.
"Consumers were the source of strength during the latest economic expansion, with their insatiable demand for new homes and cars," Statistics Canada said.
"In April, a number of special domestic and international factors stalled this demand, which resulted in lower output for residential construction and the retailing industry. There was a retrenchment in the travel-related industries, as both Canadians and international tourists stayed home."
The travel sector suffered because of the outbreak of severe acute respiratory syndrome (SARS) that began in March. "International travel in and out of Canada suffered an across-the-board slowdown in April of 5.8 per cent."
However, the agency said it was impossible to isolate the total impact of SARS on GDP.
"The war in Iraq, a weaker-than-expected U.S. economy, a stronger Canadian dollar, fluctuating crude oil prices and other events had inter-related effects in some industries."
Retail sales also fell for the second consecutive month in April, mainly because of lower sales at gasoline service stations.
On Wednesday, Finance Minister John Manley said the government has cut GDP forecasts for 2003 by fully one percentage point, to just 2.2 per cent from the 3.2 per cent projection in his February federal budget.
But Manley played down the latest Statistics Canada report yesterday.
"We knew that April was going to be a bad month. But we're not expecting a negative quarter," he said in Ottawa.
Manley, who had been in New York on Thursday for meetings regarding the North American economy, said he thought the mood there is good and that people believe growth is "just around the corner" in the United States.
"There's optimism but it's rather cautious. The expected bump (improvement) that was to follow the end of the geopolitical uncertainty (Iraq) . . . didn't materialize as quickly as hoped," the minister said.
Manley also said he'll be forced to dip into the federal budget's rainy-day fund to shelter Canadians from a rising tide of unexpected expenses and such woes as SARS and mad cow disease.
Statistics Canada rhymed off a number of negative factors affecting the economy, including a 0.8-per-cent decline in industrial production.
"A drop in aircraft and aircraft parts production, as well as sluggish motor vehicle parts output, overshadowed the robust gains registered by the car and truck industry, leaving the transportation sector at its lowest level of the year," the federal agency said.
Housing starts declined for a second straight month.
National jobless rate dips to 7.4%; Solid growth seen in full-time work; region's jobless rate falls to 5 per cent


january 10, 2004
The Canadian economy cranked out about 53,100 additional jobs last month, most of them full-time positions, to nudge the December jobless rate down slightly to 7.4 per cent, Statistics Canada said yesterday.
The December jobless rate of 7.4 per cent is lower than the 7.5 per cent reported in November and well off the peaks of eight per cent reported last summer.
Because fewer Americans were looking for work, the jobless rate actually slipped in the United States to 5.7 per cent from 5.9 per cent.
Canada Rate Is Lowered For 5th Time In Last Year

April 14, 2004

The Bank of Canada lowered its key interest rate on Tuesday for the fifth time in the last year, noting that many Canadian businesses still needed to adjust to a more competitive global economy in spite of benefits from strong commodity prices.
The central bank dropped its overnight lending rate to 2 percent from 2.25 percent. The rate was 3.25 percent a year ago when the Canadian economy appeared to be on the verge of a growth spurt and accelerating inflation.
Since then, a sharp rise in the Canadian dollar has dampened exports, and consumers, previously the driving force behind economic growth, have turned more cautious. The Canadian dollar surged from a low of 62 American cents in early 2002 to 79 cents in January.
The recent interest rate cuts have put a brake on the Canadian currency by making yields on Canadian securities less attractive to foreigners. The Canadian dollar has lost more than a cent in recent days, and was trading Tuesday at slightly under 75 cents.
In contrast to the slide in interest rates north of the border, the Federal Reserve has held the federal funds rate at 1 percent since last June.
The central bank in Ottawa said in a statement that global economic developments, like currency movements and intensifying competition, ''create a need for adjustments by many businesses.'' As a result of the buoyant dollar, Canadian businesses ''are not only having to become more cost efficient, but also more innovative in terms of their products and processes,'' said Jayson Myers, chief economist at Canadian Manufacturers and Exporters, a trade group based in Ottawa.
In addition, Patricia Mohr, an economist at the Bank of Nova Scotia in Toronto, said that Canadian consumers were generally ''much more conservative'' than Americans. The spending habits of Canadians were more sensitive to movements in their currency and the performance of export-related industries, Ms. Mohr said.
One sign of faltering consumer demand north of the border has been a drop in motor vehicle sales in the last eight months, on a year-over-year basis. The economy shed jobs in both February and March, with the unemployment rate edging up to 7.5 percent.
Canada's gross domestic product contracted slightly in January and analysts have scaled back their projections of first-quarter growth, now estimated at about 2 percent, adjusted for inflation. Canada's growth rate for 2003 as a whole was 1.7 percent, compared with 3.1 percent in the United States.
Exports made up 41 percent of Canada's total output last year, the highest proportion among major industrial countries. In the United States, it was 9.5 percent.
Canada is a large producer of a variety of commodities -- oil and natural gas, nickel, copper, coal and lumber, for example -- whose prices have moved up sharply in the last year.
Still, the combined value of exports by the farm, energy and forestry sectors remains less than shipments of machinery and automotive products. Furthermore, the benefit of higher prices for some commodities like natural gas has been mitigated over the last year by stagnant volumes.
Some analysts took the view that Tuesday's interest rate cut would probably be the last in the current cycle. David Wolf, an economist at RBC Capital Markets in Toronto, a unit of the Royal Bank of Canada, wrote to clients that the central bank appeared confident that ''the current very low level of rates will be sufficient to spur the needed growth.''
But Arthur Donner, an economic consultant in Toronto, said that ''profound problems'' in the American economy, notably soaring trade and budget deficits, were likely to lead to a further weakening of the American dollar, and thus another jump in the Canadian unit. ''We've all breathed a sign of relief,'' Mr. Donner said. ''But I wouldn't be surprised to see the Canadian dollar test 80 cents.''
Mr. Myers of the manufacturers and exporters group said that he thought the economy was ''much weaker than the statistics suggest'' in spite of rising demand for Canadian goods from the United States.
Citing recent plant closures and rising unemployment, Mr. Myers said that ''we haven't seen the full impact of the high dollar.''
''Companies may be getting more product out the door, but they're not necessarily making more money,'' he added.
Photo: The benefit of higher prices for commodities like natural gas has been mitigated over the last year by stagnant volumes. This Anadarko plant in Alberta has a capacity of 140 million cubic feet of gas a day. (Photo by Anadarko via Bloomberg News)(pg. W7) Chart: ''Narrowing the Gap'' The Bank of Canada lowered interest rates again yesterday, bringing them closer to rates in the U.S. Graph tracks Bank Of Canada overnight lending rate and United States Federal Funds Target Rate since 2002. (Source by Bloomberg Financial Markets)(pg. W1)
Canadian Economy Shows 2.8% Growth In 2004

March 2, 2005

The Canadian economy slowed in the fourth quarter, but over the full year 2004 grew 2.8%, Statistics Canada reported Monday. Growth in the fourth quarter was just 0.4%, however, down from 0.7% growth in the third quarter.
The government statistics agency pointed out that Canada's gross domestic product has been pressured by weaker exports, which have been hurt by the higher Canadian dollar, especially in relation to the U.S. dollar.
"The United States economy grew at an annualized rate of 3.8% in the fourth quarter, in contrast to an annualized growth of 1.7% for Canada," Statistics Canada said. "Exports declined for a second consecutive quarter, while final domestic demand strengthened to 1.1% growth. GDP grew 0.2% in December following a 0.3 percent increase in November and a flat performance in October."
Economy's roaring past 'speed limit'; StatsCan cites hefty investment, rallying exports Growth virtually ensures rate hikes, TD analyst says

Dec 1, 2005

Furthermore, StatsCan yesterday revised upward the preliminary growth estimate for the second quarter, to 3.4 per cent from 3.2 per cent.
Healthy U.S. demand, particularly for automotive products, fuelled a 10.4 per cent jump in total Canadian exports, reversing a 1.1 per cent drop in the prior quarter.
"The trend in the employment numbers, U.S. economic growth and preliminary data for November all suggest a very favourable backdrop for Canada."
Canadian economy strengthening, central bank says


April 2007
The Bank of Canada is presenting a mostly rosy picture of the economy over the next three years, saying Canadians will continue to have robust job prospects and higher disposable incomes.
The projections in the bank's semi-annual Monetary Policy Report released Thursday continue to highlight the increased risk of inflation and the unexpected stubbornness of the U.S. economic weakness.
And for the first time, the bank has begun to factor in the impact of the aging population as baby boomers approach retirement.
The leading edge of the baby boomers, the generation born after 1946, will reach 62 in the next two years and the bank projects the reduced labour supply will result in a 0.1 per cent decline in potential gross domestic growth in 2009.
Going forward, the effect will increase, said the bank -- meaning that unless productivity increases, Canadians will have to get used to lower growth.
But overall, the bank says the Canadian economy is picking up steam from last year's poor fourth quarter, and cash-flush Canadians will continue to spend like it's Christmas and drive the economy forward.
"Consumer spending is expected to grow solidly over the projection period, reflecting further gains in real disposable income and increases in household net worth,'' the report states.
Canada's superior economic prospects over the United States, combined with continuing strong commodity prices, will keep the loonie trading in a relatively high range between 86.5 and 89.5 cents US, the forecast says.
The bank's projection of gross domestic product is that it will grow by 2.2 per cent this year and 2.7 per cent in each of the next two years.
As it did on Tuesday when it left its key interest rate unchanged at 4.25 per cent, the bank stressed the risk of inflation.
Headline inflation, which includes volatile gasoline and food prices, will hit a relatively high 2.8 per cent by the end of the year, the bank says. But that will largely reflect year-over-year comparisons with slack gasoline prices last October.
Core inflation, excluding fuel and food, was running at 2.3 per cent in March but is expected to moderate, suggesting that the bank does not view price risks as sufficient to warrant the first interest-rate increase since last May.
Excess demand combined with the momentum of higher food prices will keep inflation above the bank's desired target for most of this year, before returning to the two per cent target level next year and in 2009.
That's because the upward pressure on prices from an economy operating slightly above its output potential will ease and the red-hot housing market, particularly in the West, will begin to cool.
"This inflation projection is consistent with an unchanged target for the overnight interest rate,'' the bank said.
The main blemish on the rosy picture is the unexpectedly stubborn weakness in the U.S. economy, which is dragging down Canadian exports to the American market.
The bank expects U.S. growth will slow to 2.1 per cent this year, from 3.3 per cent last year, largely based on the meltdown of the American housing sector which is expected to continue through 2007, and weaker business investment.
The impact on Canada in terms of less demand south of the border will be felt most acutely in the first half of this year before easing as U.S. growth begins a slow climb back to 2006 levels, the Bank of Canada predicts.
The U.S. effect is being offset by a world economy that although slowing from last year's torrid pace, will expand by 4.8 per cent this year and 4.6 per cent next.
Prospects for Canadian businesses remain high, the bank said, predicting continuing solid profits and robust investment.
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Canadian economy resumed growing in May

July 30, 2007


After contracting in April, Canada's economy grew by a slim 0.1 per cent in May, Statistics Canada reported Wednesday.
May's figure matched economists' expectations for growth.
"The economy gained strength from sharply higher sales of motor vehicles, which propelled the retailing and wholesaling sectors," Statistics Canada said.
On an annualized basis, the economy grew by 1.8 per cent between May 2003 and the same month last year.
Sideswiped by the impact from the outbreak of severe acute respiratory syndrome (which affected the hospitality sector) and weakness in manufacturing, the economy shrank by 0.2 per cent in April. That marked the first contraction since Sept. 11.
For May, the financial sector expanded as a result of the stock market's recovery, while the real estate agent and brokerage industry benefited from a stronger resale housing market, Statistics Canada said.
Improving weather in western Canada helped the agricultural sector increase crop production following two years of drought.
Results from the tourism sector were mixed in the wake of the SARS outbreak.
"Restaurants posted gains, hotels were flat and airlines and travel agents continued to register lower activity levels," Statistics Canada said.

As U.S flounders, Canada holds steady

the Globe and Mail (Canada)

September 12, 2007
The difference in mood couldn't be more striking.
In the United States, rating agency Moody's is talking about a growing risk of recession, the housing market keeps getting worse, and the U.S. Federal Reserve Board seems certain to cut interest rates next week - the only question being whether it will be a quarter of a percentage point or half.
In Canada, the chief executive officers of two major banks say the credit crunch is a healthy development and they have the wherewithal to withstand it. Housing numbers are as good as ever. And the central bank said it no longer needs to do anything special to help the markets through their troubles.
What seems like a credit market hurricane in the United States, wreaking widespread economic damage, is coming across as merely a twister in Canada. Its damage is severe but localized, confined to the commercial paper market. The rest of the economy is largely undisturbed, at least for now.
"The initial indications are, in August, the Canadian economy just sailed right through this," said Philip Cross, chief of current economic analysis at Statistics Canada.
Like most economists these days, Mr. Cross is grabbing any recent data he can find to see how the credit crunch is playing out in people's everyday lives.
So far, he has found little sign of any impact in Canada, beyond poor prospects for lumber sales to the U.S.
Rather, Mr. Cross sees healthy indicators for global trade, rising demand for many of Canada's plentiful commodities, a vibrant Canadian housing sector, and strong demand for cars on both sides of the border. He also sees consumer confidence rising in Canada, and a Canadian job market that's the strongest in decades.
On the corporate side, Mr. Cross noted, Canada's financial sector has taken pains to show that it is not in any distress. And while some Canadian companies have admitted they are exposed to the asset-backed commercial paper that's in so much trouble, Mr. Cross has yet to find any indication they are making major changes in business plans or investment.
"I haven't seen one company in Canada saying 'we are scaling back on our operations because of the flow of funds,' " he said.
While it will take many more months to assess the full impact of the credit squeeze on the Canadian economy, optimism prevails here, and economists generally expect that Canada will fare much better than the United States, despite the proximity of the two countries.
"We have seen some real separation between Canada and the United States right now," said Douglas Porter, deputy chief economist of BMO Nesbitt Burns. "We still keep chugging along."
Mr. Porter puts himself on the optimistic end of the range of opinion, but even the more pessimistic economists expect Canada will fare better than the United States.
"We're decoupling in the sense that they're falling into a big pit, and we're falling into a little pit," said Dale Orr, chief economist at Global Insight Canada.
Canada's ability to shield itself from the credit storm so far is probably because Canada's economy is fundamentally different than the United States, despite integration through free-trade agreements, Mr. Cross said.
Canada's mainstay is natural resources, and when there is a commodities boom, the United States pays while Canada's economy prospers. The American technology sector, on the other hand, is much bigger, on a relative basis, than Canada's.
Most of the integration of the two economies is in the auto and forest sectors. And while those sectors are key to the Canadian economy, they are becoming less important over all. Exports of energy and industrial materials are now more important to Canada than cars and trees, Mr. Cross notes.
With energy prices poised to remain high, Canada's corporate profit picture, government finances, household spending, and construction and services sectors are also expected to continue to prosper.
British Columbia is a key testing ground. About a third of Canada's forest product exports come from B.C., and forecasts for the provincial economy are being scaled back as the U.S. housing sector tanks and the Canadian dollar remains strong.
But B.C. will still grow by more than 3 per cent this year, forecasts Jock Finlayson, chief economist for the B.C. Business Council. Domestic demand is humming along, construction is booming, and exports to Asia are on the rise, he says.
It would be naive, however, to think that the Canadian economy will remain untouched by the credit crunch and the ensuing downturn in the United States, economists caution. Exporters will continue to feel pressure from softening American demand and a high Canadian dollar.
"We're still sifting through the data. It's clearly not going to be better than it was," says Glen Hodgson, chief economist at the Conference Board of Canada.
"The good news is, no one seems to be crippled by this."

Central banks juice the markets; TSX up 339 points. Billions poured in to ease credit crunch

the Gazette

March 12, 2008
Stock markets soared yesterday after North American and European central banks announced a renewed co-ordinated effort to temporarily inject hundreds of billions of dollars in cash into global financial markets to ease the still tightening global credit crunch.
On Bay St., the battered benchmark TSX index recovered by more than 300 points, while on Wall Street, the blue-chip Dow rebounded more than 400 points.
The measures, which were seen as evidence of the willingness of the world's monetary authorities to end the global credit crunch and support the world financial system, included a $4-billion injection here by the Bank of Canada and up to $200 billion U.S. by the Federal Reserve in the U.S..
National Bank of Canada chief economist Clément Gignac said the action is another step toward dealing with the current financial disruptions, but added "still more will have to be done" to deal with the roots of the problem, which include "some bad lending practices, the lack of disclosure and resulting mistrust between market participants."
The concerted measures were announced as economic reports highlighted the gap between Canada's booming resource sector and weakening manufacturing sector.
But a major economic think-tank also forecast that, despite challenging times for the Ontario and Quebec economies, neither would slide into recession and would rebound next year.
"The weakening trade balance will continue to erode bottom-line growth in Ontario and Quebec, and more manufacturing layoffs are expected," the Conference Board of Canada said in its latest provincial forecast, in which it projected growth this year would range from more than three per cent in each of the four western provinces, to between 2.6 per cent and only 1.5 per cent in the rest.
"Still, healthy capital spending and decent income growth will support Ontario's economy, producing growth of 2.1 per cent in 2008," it said.
"The domestic economy in Quebec is even more of a pillar of growth, thanks to federal and provincial tax cuts that will boost consumption," it said, adding the province's growth is forecast to be 2.4 per cent.
In contrast, Manitoba will lead the parade this year with growth of 3.7 per cent, followed closely by Saskatchewan at 3.6, Alberta at 3.3, and British Columbia, 3.1.
"Boosted by ongoing construction projects, robust domestic spending and an optimistic outlook for manufacturing, the Manitoba economy is firing on all cylinders," said board economist Marie-Christine Bernard.
"In central Canada, the sombre U.S. outlook will present a challenge for Ontario and Quebec, but neither province is expected to slide into a recession."
Alberta's economy, meanwhile, is cooling down because of lower drilling activity, combined with weaker gains in retail sales and lower population growth, it said. Weakness in the U.S. is cause for concern for British Columbia's forestry and manufacturing sectors, but the province's domestic economy remains strong.
In Atlantic Canada, it projects growth of 2.6 per cent in Nova Scotia, 2.2 in New Brunswick, 1.9 in Prince Edward Island, and only 1.5 in Newfoundland, which is down from a rapid 7.3 per cent growth spurt last year.
The gap between the manufacturing and resources sector was further underscored by Statistics Canada, which reported that the merchandise trade surplus rose more than expected in January, to $3.3 billion from $2.4 billion in December. But the improvement was almost entirely due to higher prices for commodity exports, especially oil, which more than offset plunging auto and machinery and equipment exports, the agency said.
While trade is expected to act as an increasing drag on overall economic growth, the domestic side of the economy is still showing a lot of spunk, which is being reflected in a still-healthy housing market - a sharp contrast to the deepening U.S. housing recession.
In contrast to Canada, the U.S. also reported that its trade deficit, which includes goods and services, rose more than expected in January. But in the U.S. case, the deeper deficit was because of the surge in oil prices.
Excluding oil, the deficit eased as the depreciation in the U.S. dollar works its magic, bolstering exports and dampening imports.
And unlike here, analysts said trade should be a plus for the U.S. economy during the first quarter of the year, helping offset weakness on the domestic side of that economy.
"In the wake of Friday's disastrous non-farm payroll number, the important question for the U.S. economy is no longer whether there will be a recession, but how deep and prolonged it will be," said CIBC World Markets economist Meny Grauman. "A big factor in this equation is net trade, which has the power to be one of the very few shining lights of the U.S. economy in the first half of the year."
In Canada, in contrast, there was more evidence of a healthy domestic side of the economy, with Statistics Canada reporting new home prices rose a faster-than-expected 0.6 per cent in January, leaving them 6.5 per cent higher than a year earlier.
The regional divide was underscored by the reported 4.5 per cent spike in prices in Saskatoon, although Porter noted there were also gains of more than one per cent in each of Kitchener, Ont., St. John's, N.L., Ottawa and Charlottetown, while prices dipped 0.5 per cent in Edmonton, as that city cools from last year's overheated conditions.
Canada 'flirting with recession'; Economy shrank: Auto production slump, winter weather blamed

the Gazette

May 31, 2008
Finance Minister Jim Flaherty rejects the idea, but some analysts say the Canadian economy may be in at least a mild recession after being driven to its first quarterly contraction in five years by a slump in auto production and some brutal winter weather.
"With goods piling up, the order went out to stop the production lines, and the resulting dive in manufacturing output sent the Canadian economy flirting with recession as the first quarter came to an end," CIBC World Markets economist Avery Shenfeld said after Statistics Canada reported yesterday that the economy shrank at an annual 0.3 per cent pace in the first three months of 2008.
The surprisingly weak performance, if it isn't revised upward later and is followed by another decline this quarter, will produce back-to-back quarterly economic contractions - the most commonly used definition of what constitutes a recession. The economy expanded by only 0.8 per cent in the final quarter of 2007.
Flaherty, however, noted that outside the weakness in the auto industry most of the rest of the economy remains strong.
"The strengths of the economy across the country are quite remarkable," he told reporters in Montreal after meeting with his provincial counterparts. "When you take the woes of the auto sector out of the equation, there was economic growth in the first quarter in Canada.
CIBC's Shenfeld said that Canadian output fell in both February and March, suggesting this quarter "won't be a whole lot better."
"It won't qualify as the great recession of 2008, but it's certainly the great stall," he said. "On the surface, a Canadian economy blessed with high valued resources, and not suffering the plunging house prices besetting the U.S. and (Britain), somehow looked to have been the weakest G7 economy in terms of first quarter real GDP."
In fact, the Canadian GDP number in the first quarter was in contrast to 0.9 per cent growth in the U.S. economy.
"The fact that Canada may be in a recession while the U.S. economy avoids one is unbelievable, given how healthy an economy (the Conservatives) inherited and the fact that unlike the U.S. we haven't had a housing meltdown," said Liberal finance critic John McCallum. "Even George Bush understands that to really stimulate the economy you need to put money directly into people's pockets."

Even though the loonie is soaring, it's unlikely the Bank of Canada will do much about it

the Globe and Mail

October 19, 2009
The Canadian dollar is on a rocket ride, but the Bank of Canada's response this week mostly likely will be to stay in a holding pattern. Governor Mark Carney and his senior advisers conclude their latest policy deliberations today. They will announce their conclusions tomorrow and release the bank's quarterly report on the economy on Thursday.
When policy makers released their last quarterly report on July 23, the Canadian dollar was trading at about 92 cents against its U.S. counterpart, a 7-per-cent surge from the end of June that the central bank said was "significantly moderating" the rebound. The loonie has jumped by another 5 per cent since then, ending the week at a little more than 96 cents. Much of that increase occurred in the last two weeks, suggesting that the Bank of Canada's biggest worry in July - that a "stronger and more volatile" dollar could become a "significant drag" on the recovery - has become reality.
There are those who are calling on Mr. Carney to escalate his verbal battle with currency speculators, who are responsible for a significant portion of the loonie's appreciation. "If our products aren't competitive, we'll fall behind," Pierre Plamondon, CFO at Quebec City-based Exfo Electro-Optical Engineering Inc., said last week.
Mr. Carney is sympathetic to the argument. Nevertheless, it's important to focus on the modifier he used in July to describe what would constitute a worst-case scenario: "significant."
The country's prospects are actually brighter than they were in the summer. China's economy is growing faster than the Bank of Canada thought it would, lifting global growth and boosting commodity prices. Canada's labour and housing markets also continue to surprise analysts with their resilience.
The Conference Board of Canada said on Friday that Canada's economy would grow 2.9 per cent in 2010, similar to the central bank's outlook, suggesting the dollar's rise hasn't impeded the recovery any more than policy makers already were expecting. None of that suggests the economy is facing a "significant" headwind.
Mr. Carney can re-emphasize his pledge to leave the benchmark lending rate at 0.25 per cent until June of next year, while de-emphasizing the fact that the pledge is contingent on inflation remaining tame. The prospect of a benchmark interest rate of almost zero well into next year should cause those speculators searching for yield to look elsewhere. "Put it all together, it ends up being steady as she goes," said Avery Shenfeld at CIBC World Markets.
U.S. woes hit home as Bank of Canada cuts rates

the Globe and Mail

December 5, 2007
Central banks are warning that the global credit crunch is no longer a problem just for the financial markets, and is beginning to take a painful bite out of the real economy.
The Bank of Canada cut its key interest rate by a quarter of a percentage point yesterday to 4.25 per cent. It was the first interest rate cut since April, 2004 - an insurance policy to offset some of the harm that the credit crunch is posing to consumer and business activity.
The central bank pointed out that market turmoil has persisted far longer than expected, with the dual effect of a tightening of credit conditions and a slowing of U.S. demand for Canadian products.
At the same time, top U.S. officials warned that market anxiety has deepened, and a European Central Bank official said yesterday that the credit turmoil is eroding Europe's immunity to a U.S. slowdown.
"Certainly the U.S. was the first to be afflicted by this, to feel the impact," said Stewart Hall, strategist at HSBC Securities (Canada).
"You can make the case that the implications are making their way around the globe," Mr. Hall said.
Canada's central bank is the first outside the United States to take monetary policy action.
The quarter-point interest rate cut and economic assessment drove down the dollar by more than a cent yesterday, to close at 98.8 cents (U.S.).
The Bank of Canada pointed to the strong dollar, Canada's vulnerable export sector, and lower-than-expected inflation. In the past month, the bank has become increasingly pessimistic about the economy's ability to thrive with a strong currency and U.S. downturn.
It also highlighted the financial market problems in dealing with losses and repricing of securities based on U.S. subprime mortgages.
"In these circumstances, bank funding costs have increased globally and in Canada, and credit conditions have tightened further," the bank said.
Interbank lending rates widened significantly after mid-August, but then settled back, only to widen again in November because banks are more wary of lending to each other.
Those higher costs are spilling over into the real economy in the form of more expensive mortgages and a growing reluctance on the part of banks to lend to anyone but the best of customers.
The Bank of Canada's last official estimate was that the credit crunch was taking the same toll on the economy as an interest rate hike of a quarter of a percentage point. That estimate is clearly too low now, economists said, and the central bank is undoubtedly revising it upward.
"I don't really think the Canadian dollar was the big driver here [for the Bank of Canada's decision to cut rates]," said Douglas Porter, deputy chief economist at BMO Nesbitt Burns. "I think it was the ongoing turmoil in financial markets and the very real risk it's morphing into a macroeconomic event."
Craig Alexander, deputy chief economist at Toronto-Dominion Bank, said it's unlikely that yesterday's rate cut will do much to resolve the credit and liquidity problems plaguing the markets. Lower rates may marginally encourage domestic consumption and business investment, but won't directly resolve the lack of trust and the risk aversion that has prompted credit to tighten in the first place, he said.
Lower rates will, however, help the Canadian economy deal with the impact of a slowing U.S. economy, economists said, and a U.S. slowdown will likely hurt Canada more than the effects of the credit crunch.
Already there are signs that the Canadian economy is cooling, even in Western Canada, said Ted Carmichael, chief economist for J.P. Morgan Securities Canada.
He believes Canada's growth will slow to a crawl for "an extended period" because of its exposure to the U.S. economy.
The Bank of Canada said the Canadian economy is still in overdrive for now, but pointed out inflation has softened considerably. In particular, the high dollar has prompted a strong reaction by retailers to cut their prices for goods sold in Canada, the bank said.
But the bank gave no indication about whether yesterday's rate cut was the first of many. Rather, it said it would reassess the data in January.

Ontario economy shrinks, fuelling fears of recession

the Globe and Mail

July 4, 2008

Ontario's economy shrank between January and March, leaving it in worse shape than anyone expected and raising fears that Canada's most populous province is well on the road to recession.
The Ontario government released figures yesterday showing that the economy contracted 0.3 per cent during the first three months of this year, putting it in negative territory for the first time since the third quarter of 2006 and midway to a recession, something not seen in the province since the early 1990s. Just three months ago, economists were projecting that Ontario's economy would grow 1.2 per cent this year - a consensus forecast that has since been slashed in half in the wake of an unexpected rise in oil prices and plummeting motor vehicles exports to the United States.
"We are in some challenging times," Finance Minister Dwight Duncan told reporters yesterday. "I think those challenges continue."
In a provincial forecast released yesterday, Royal Bank of Canada
says it expects economic growth in Ontario to hover around 0.7 per cent this year, the weakest performance since the last recession. It also marks a sharp reversal from last year, when the economy grew 2.2 per cent.
Ontario accounts for just under 40 per cent of the national economy, and its waning fortunes appear to be dragging down the entire country. In the first quarter, Canada's economy also shrank 0.1 per cent.
"The unexpected decline in the national economy in the first quarter of this year was most likely the result of a notable contraction in activity within Ontario's trade sector," said Craig Wright, chief economist at RBC.
Mr. Duncan declined to say whether he believes Ontario is poised for a recession, commonly defined as two back-to-back quarters of contraction. He acknowledged that Ontario's economic fortunes have deteriorated since March, when the provincial budget was unveiled. But Mr. Duncan has no immediate plans to curtail spending on various government programs because he said it is still too early in the year to determine how the slower growth will affect his revenue and expense outlook. He is also not cutting the budget's growth projection of 1.1 per cent for the economy this year.
Canada's manufacturing heartland has felt the ravages of a strong Canadian dollar, high oil prices and slowing growth in the United States for some time. More than 200,000 manufacturing jobs have vanished in recent years. The figures released yesterday reveal that the weakness in manufacturing is spreading to the province's entire economy. Consumer spending, residential construction and spending by businesses all declined.
Mr. Duncan said Premier Dalton McGuinty's government has taken a number of steps to help jump-start the economy, including investing in skills training for laid-off workers and in transit and other infrastructure projects to create jobs.
"The plan we have laid out is the right plan and it's the plan that will see us through these challenging times," he said.
Progressive Conservative Leader John Tory accused the government of not doing enough to address the province's economic challenges.
"I think the house is fully ablaze when it comes to the economy, and Mr. McGuinty and Mr. Duncan are sitting around discussing whether they can smell smoke," he told reporters.

Costs going up, but economy on right track: Bank governor

the Toronto Sun

July 18, 2008
Canada might avoid a recession, but the cost of gasoline, heating and groceries will continue to rise until early next year.
This was the message Mark Carney, governor of the Bank of Canada, delivered in his latest report on the health of the economy.
The quarterly report said Canada faces three challenges: The slowing U.S. economy, the rising price of energy and wobbly global financial markets. Despite these difficulties, Carney believes the worst is over.
"The economy picks up from this point in our projection through 2008 and further accelerates into 2009," he said.
The Bank of Canada was forced to revise its April projection that the Canadian economy would grow by 1% in the first three months of the year. Hindsight revealed the economy actually shrank by 0.3% over that period.
The April projection also said Canada's economy would grow by 1.4% overall in 2008, but was later revised to predict growth of 1%.
"If you have a slow first quarter, it cascades all the way through the year," said Carney, "and we had small negative growth in the first quarter."
A recession is defined as two consecutive three-month quarters of negative growth. The Bank of Canada said yesterday that the economy would grow by 0.8% in the second quarter of 2008, but we won't know for sure if we've avoided a recession until Statistics Canada releases its figures in mid-August.
Overall, the report was positive. Carney explained that our banks have lots of money compared to their American counterparts. He also said Canadian financial institutions were smart enough to avoid the mortgage troubles plaguing American banks.
"When you look at the change between April and now, the vast majority of the change into 2009 is the price of energy, so the price of gas, the price of natural gas and gas for our cars is going up," Carney said. "Food prices, which had been falling, uniquely in Canada, are starting to firm up, but not dramatically."
Automobiles and other big-ticket items people buy less often will either go down in price or stay about the same.
Carney said the rising cost of goods would persist until the first three months of 2009, when it is predicted prices would peak before coming back down.
Canadian economy edges out of recession


DEC 2, 2009
OTTAWA (Reuters) – The Canadian economy crawled out of recession in the third quarter after three quarters of contraction, but growth was subpar as industrial production continued to decline, particularly in the energy sector.
Statistics Canada reported on Monday 0.4 percent annualized growth in real gross domestic product for the period. But September provided a good hand-off into the fourth quarter by expanding 0.4 percent on a monthly basis from August.
The quarterly gain fell short of the market forecast of 0.7 percent growth, and economists were reluctant to declare the recession over, except in a purely technical sense.
""The economy virtually didn't grow in the third quarter, but I think the positive take-away is that it does confirm that the economy is not contracting any more,"" said Craig Alexander, deputy chief economist at Toronto-Dominion Bank.
""It is consistent with the view that the recession was drawing to a close in the third quarter of the year, although it certainly probably didn't feel like it to most Canadians, given the fact that the labor market remains extremely weak and probably will remain weak for some time,"" he said.
The Canadian dollar was slightly weaker following the number, trading as low as C$1.0584 to the U.S. dollar, or 94.48 U.S. cents, compared with C$1.0557 to the U.S. dollar, or 94.72 U.S. cents, just before the data.
Canada underperformed the United States, which saw 2.8 percent growth in the third quarter, and lags behind some other Group of Seven nations that emerged from recession earlier.
""Canada was one of the last of the developed world economies to fall into recession back in Q4 2008, but has been one of the last to emerge,"" said Stewart Hall, a market strategist at HSBC Canada.
The Bank of Canada had projected quarterly growth of 2.0 percent in its latest report in October, but the result was more in line with Finance Minister Jim Flaherty's expectation of ""flattish"" growth.
Bank policy seen unaffected
The economy was still 3.2 percent smaller than a year earlier, and the data was unlikely to persuade the central bank to break its conditional pledge to keep the overnight interest rate at a record low 0.25 percent at least until mid-2010.
""I don't think (it will affect Bank of Canada policy). Even though it is well shy of their quarterly estimate in the latest Monetary Policy Report, there had been some indications lately that they knew they had overshot the mark a bit in that forecast,"" said Doug Porter, deputy chief economist at BMO Capital Markets.
Bank Governor Mark Carney acknowledged on November 19 that growth would likely be softer than his projection, but said the outlook of ""accelerating growth in the fourth quarter and into 2010"" remained valid.
The bank's next rate decision is on December 8.
""The Bank of Canada will primarily be looking at things like the final domestic demand component and, in particular, the investment side of it, and saying that's laying a pretty good base,"" said Mark Chandler, fixed income strategist at RBC Capital Markets.
Manufacturers still pressured
Goods-producing industries fell for the ninth consecutive quarter, by a non-annualized 1.4 percent, but perked up by 0.9 percent in September, the first monthly rise since July 2008. Service industries grew 0.6 percent.
Business capital expenditures rose for the first time since the fourth quarter of 2007, with investments centering on motor vehicles and industrial machinery.
Canada's manufacturers and exporters continue to feel the effects of the downturn most deeply, hurt by a strong Canadian dollar versus the U.S. dollar, and weak U.S. demand.
Exports and imports both grew in volume terms after several quarters of decline. But imports grew far faster than exports.
Domestic spending, by contrast, is largely fueling the recovery.
Final domestic demand advanced 1.2 percent as the result of a second quarterly gain in personal expenditures. Consumer spending rose 0.8 percent, the biggest increase since the fourth quarter of 2007, with heaviest purchases on motor vehicles and furniture.

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