Canada Slows While the U.S. Surges

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Despite recent optimism that Canada was on the right track to work its way out of its current economic slump, the most recent figures show that this may not be the case at all, and are in sharp contrast to the positive economic figures coming out of the U.S.

Recovery Stalls

The much touted economic recovery in Canada which saw the numbers starting to look up in the second half of this year after a disastrous start in the wake of tumbling commodity prices and in particular oil. In fact the recent numbers are so bad, that many analysts have already slashed their fourth quarter annualized projections from 1.7 percent to only half a percent. This is in conflict with the central banks still glowing estimate of 1.5 percent.

In some ways this is surprising, as the recent rebound in oil and gas prices should have pushed the numbers up rather than down, but there are concerns across the economy that are keeping any economic growth sluggish at best. In particular, retail sales are not showing any recovery and are being held back by things such as lower gas prices and less consumer borrowing to finance retail purchases.

Interest Rates

In the U.S. however, things are looking quite different as the third quarter estimates show economic growth of 2.1 percent and projections for this quarter are even more optimistic. This should put the year on year growth in GDP at a solid 2.25 percent only just below that of 2014’s and was the driving factor in giving the Federal Reserve the confidence to finally raise interests to a range between 0.25-0.50 percent.

In contrast, the Bank of Canada will now have to consider the possibility of lowering interest rates in an effort to try and drag the economy out of its current funk. Unfortunately it does not have much more room to do that as rates are already at 0.5 percent after two quarter point reduction s already this year.

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