CANADA’S ECONOMY REMAINS ROBUST

Last week the August the housing starts was out and it showed a 9.6%

monthly decline. Although the news was bad on the surface, a closer look

showed a more optimistic picture. “For example, over the last year there

have been two instances where housing starts registered double digit

declines. To look past this volatility, one can focus on the year over

year change, which was still up a healthy 4.4%.

 

Also the level of housing starts is still greater than the demographically supported level

of 170 thousand and home prices continue to increase by leaps and

bounds. Data released this week showed that in July new home prices

increased by 10.8% on a year over year basis, the largest rate of

increase since late 1989. so it seems that the housing sector still has

considerable momentum, although as witnessed with Augusts starts data,

it is prone to stumbling from time to time.” Said the TD economist.

Canada's economy robust, IMF says: Canada's economy remains robust with

the only significant risks to continued solid growth being external, the

International Monetary Fund said in a report released yesterday. Canada

is "benefiting from its strong macroeconomic policy framework and the

boom in global commodity prices," the IMF observed in its semi-annual

world economic outlook." "Canada will be the only one of the Group of

Seven wealthiest countries to escape the economic slowdown facing the

U.S. and EU, thanks largely to its exports of oil and natural gas, says

the International Monetary Fund."

 

But what if price of oil and other commodities go down? The out look for

commodity prices hinges on the depth of the U.S economic slowdown. The

TD economist gives the possibility of U.S recession a one in four

chance. The more likely scenario is a mid-cycle U.S economic slowdown.

That is forecatested to bring the commodity index down by 9% by the

middle of 2007.