Canadian economic overview - April 28, 2006

The Canadian economy started this year at the same steady, if unspectacular, pace of last year. The mild winter was good for housing starts and not so good for the oil-and-gas industry because of less demand. In a recently published revision, it was announced that Canada's productivity in 2005 grew 2.2 percent instead of 1.1 percent as originally reported. GDP: Grew 0.2 percent in both January and February Composite Leading Indicators: + 0.6 percent in March (+ 0.2 percent for Feb, + 0.3 percent for Jan) Housing Starts: 251'000 in March (241'000 in February, 248'000 in January) Unemployment: 6.3 percent Consumer Price Index: + 2.2 percent (annualized) in March, unchanged from February 2006 and from March 2005 Trade Balance: + $59.9 billion in February for the last twelve months Prime Rate: 5.5 percent in March Special Concerns: There are two. In April, Bank of Canada increased the key lending rate for the fourth time in a row to 4.0 percent because it is concerned that high energy prices could push up inflationary tendencies. The other issue is the strengthening of the Canadian dollar. It reached US$0.89 in late April, which is a 14 year high. It is also 10.33 percent over its value one year ago. Of all the major currencies, only the Brazilian real (+ 19.76 percent) appreciated more against the US dollar in the twelve past 12 months than the Canadian "loonie" (don't ask; it's their nickname). Exports will be less competitive with such a strong currency.