Is North American growth slowing or is it just a temporary dip ?

Schwaben small S    Schwaben Blog

 

July 10, 2015

 

Weekly Statistics:

 

 

Today

Week Ago Year Ago
  10-July-15 03-July-15

10-July-14

       
S&P TSX

14,385

14,593

15,114

S&P 500

2,076

2,069

 1,964

DJIA

17,752

17,683

16,915

OIL

$52.13

$52.78

 $95.77

USD vs CAD

0.7888

0.7905

0.9315

Gold

$1,160

$1,169

 $1,342

 

The International Monetary Fund (IMF) has cut its growth projection for the Canadian Economy. According to the IMF’s forecast, Canada’s real GDP will grow at 1.5 percent this year, down sharply from their previous forecast of 2.2 percent in April. In addition to Canada, it also slashed its forecast for the growth of the US economy for 2015 to 2.5 percent from 3.1 percent.  It is no surprise that the collapse in the oil prices is one of the main reasons for this setback but the IMF also pointed to some one-time factors like harsh winter and US port closures for the poor growth in North America. Due to the slump in oil prices, Canada’s international trade numbers for May showed a near-record trade deficit of $3.3 Billion. Exports of energy products are down 35 percent for the year to date compared with the same period a year ago. Although poor economic indicators have led economists to conclude that Canada’s GDP will likely contract again in second quarter, which means technically the Country is in recession, other economic indicators, specifically unemployment rate and housing starts are showing signs of strength. In the recently released unemployment report, Canada shed 6400 jobs but unemployment rate has been steady at 6.8 percent for the last five months. Although a rising trade deficit, because of energy exports and collapse in oil prices, Canada is still able to maintain its unemployment rate, which means that non-energy related industries are creating  jobs and are growing sufficiently to offset other job losses. A rate cut from Stephen Poloz, Governor of Bank of Canada, during his next announcement on July 15 could bring the interest rates down to 0.5 percent from 0.75 percent. This will be the second rate cut after a surprise rate cut in January. At a time when the housing market is already overpriced, a rate cut could cause house prices climb further out of reach for many Canadians.

Source- Bloomberg, Globe Investor Gold, Financial Post, Market Watch, Trading Economics

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s