Canadian Economy May Recover in 2010

Canada’s economy contracted for a ninth month in April. And although during the next few months economic output may still decline, at Trading Economics we think that Canadian economy may get out of the crisis faster than expected.

In fact, a heavy exposure to commodities and deep trading links with the United States has made the Canadian economy particularly vulnerable to a downturn in the global economy. For instance, slumping shipments of cars and lumber to the U.S., and lower prices for exported commodities had shifted Canadian trade surplus into a deficit in January, April and May and brought industrial production into a negative territory in March, April and May. To make things even worst companies are cutting back on investments and workforce. In fact, in June payrolls shrunk for the seventh time in eight months and nation recorded the highest unemployment rate in 11 years.

However, even though there are clear signs of deterioration in the world's eighth largest economy, we think Canada is in a much better condition than other countries. For instance, balance sheets in the Canadian financial sector look pretty good and nation’s 21 banks earned more than C$12bn last year and needed no bailout. Moreover, the government and central bank are taking measures to improve credit availability and spending. The overnight interest rate was cut to 0.5 per cent and a C$40bn fiscal stimulus package was introduced at the end of January. Also, the housing market seems to be recovering; building permits rose 15 percent in May and resale of houses remains buoyant, with output of real estate agents and brokers up 8.2 percent during the month. More importantly, consumer confidence has climbed further in June as Canadians become increasingly assured that better economic times are ahead.

Anna Fedec,
7/10/2009 12:52:47 PM