What could affect the Canadian economy!

A Hot Tip about Business Environment in Canada

Last updated: 31 May 2011

Looking at the Canadian economy we can see a huge influence of American economical fluctuations, and that could be due to the close neighborhood and relationship in trades between the two countries.
Simply like this, if the American economy goes down, such situation will affect the Canadian situation.
With more illustration, if the Canadian exports toward USA go down because a deficit from the American side, the Canadian balance trade might go down, and this will affect the Canadian budget and economy (in certain period). And vise versa.
However trade balance (Exports vs. Imports) is one of the reasons that might affect the economy, among others like inflation, interest rates…etc.
Another illustration could be addressed by the currencies exchange price; So let say that $1US = $1.10 CAN ( in a certain time), that means every American dollar buys 1.10 Canadian dollar. And let's assume that assume that the Canadian dollar suddenly went down, so $1US = $1.25, at this point the American dollar will buy more Canadian currency, $1.25. Therefore American people will be buying more Canadian products because of the drop in the exchange rate.
Looking more closely at the Canadian economy, and with the latest report by the "pulse of economies, May, 30, 2011", Canada released the Gross Domestic Product estimate, which showed that the Canadian economy expanded in March after contracting back in February, while the Canadian economy continued to expand in the first quarter of 2011 at a stronger pace than the final three months of 2010.
Canada released the GDP estimate for the first quarter of 2011, where the Canadian economy expanded by an annualized 3.9% in the first quarter, compared with the prior revised expansion of 3.1% and slightly worse than median estimates of 4.0%.
The Canadian economy expanded by 0.3% in March, compared with the prior revised contraction of 0.1% and median estimates of 0.2%, while compared with a year earlier, the Canadian economy expanded by 2.8%, compared with the prior revised expansion of 3.0%, and median estimates of 2.6%.
The Canadian economy continued to expand in March, where rising commodity prices supported economic growth, and rising demand from emerging markets also contributed to economic growth in Canada, nonetheless, the rising value of the Canadian dollar, in addition to the ongoing weakness in major economies continued to weigh down on growth levels in Canada.
Canada’s economy depends heavily on exports, especially to the United States, since the U.S. is Canada’s largest trading partner, and since economic growth slowed down in the United States during the first quarter, economic growth remained weak in February and March.
The Bank of Canada warned that the rising value of the Canadian dollar is likely to weigh down on economic growth, where the Canadian economy has been expanding over the past period, but economic growth remained unstable due to the weak conditions surrounding global growth.
The improvement in global economies will surely be reflected onto the performance of the Canadian economy, especially if economic conditions in the United States improve at a stronger pace, and since we don’t expect that to happen before the second half of 2011, we shouldn’t expect the Canadian economy to be able to grow at a strong pace unless economic activities pick up in the United States.
Canada also released the current account balance for the first quarter of 2011, where the current account deficit narrowed to 8.9 billion CAD, compared with the prior revised deficit of 10.3 billion Canadian dollars, and median estimates of a 7.2 billion CAD deficit.

Posted: 31 May 2011, last updated 31 May 2011

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