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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

November 29, 2010 at 9:55 AM

After riding out the recession, Canada faces a weaker economy

Set aside your Irish worry beads for a moment. What about Canada? Washington state’s No. 2 trading partner ($6.8 billion in exports last year), weathered the Great Recession with Canadian restraint. But now some troubling trends are emerging. “After delivering a solid ‘V’ shaped recovery in the early stages of economic recovery, Canadian economic growth has moderated significantly over the last six months,” Toronto-Dominion Bank economist Diana Petramala told the Globe and Mail.

Statistics Canada, the government agency, released a report today showing weakening trade, with the trade deficit hitting a much higher than expected level. Tuesday’s GDP report is expected to show third-quarter growth of only 1.5 percent.

Moody’s Analytics expects a slowing Canadian economy in 2011. The big problems are a strong currency, undermining export competitiveness, and weak global demand (especially from the tepid American “recovery”). David Rosenberg, chief economist of the investment firm Gluskin-Sheff, also continues to worry about a housing downturn, especially if the Bank of Canada raises rates.

In a report first published on Business Insider blog, he also is concerned about household debt. “Canadian household leverage — debt ratios are as high as they were in the U.S.A. at the peak in relation to income (the debt/asset ratio for now looks better here). This is a longer-term concern, especially if interest rates were to be raised further in the future. I see this is a very big intermediate-term concern for the consumer spending outlook.”

The upside is that Canada has made up all the jobs lost in the recession, and has a more balanced and well regulated economy than that Colossus to the South.

Today’s Econ Haiku:

The drain in Spain falls

Mainly on the Euro bulls

Call the matador

Comments | More in Canadian economy

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