Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (43112)	2/28/2006 9:36:29 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69126

GDP growth consumer driven: StatsCan Feb. 28, 2006. 04:09 PM CANADIAN PRESS Canadian consumers and businesses let the dollars flow from their wallets last year and led the country to solid growth of 2.9 per cent, Statistics Canada said Tuesday. Despite a skyrocketing loonie — which hit a 14-year high Tuesday of 88.12 cents (U.S.) — and rising energy prices, Canada’s growth was stable last year and matched 2004 levels. A high dollar hurts manufacturers while high energy prices can dampen spending. There were spending increases across the board, and the outlook for this year remains positive, economists say. The country’s growth picture was also bolstered by rising incomes and corporate profits and an array of business investment in machines and other equipment. “It’s definitely a sweet spot in the Canadian economy,” said Carl Gomez, an economist with TD Bank Financial Group. For the fourth quarter, investment spending, exports and personal spending pushed up the GDP 0.6 per cent from a year ago. Investment in machinery and equipment was the backbone of a three-year surge in investment, climbing 10.7 per cent in 2005, its best annual performance since 1997. Statistics Canada called 2005 the year of the consumer, with a four per cent jump in personal spending on goods and services the main contributor to overall growth in real GDP. It was the largest annual increase since 2000, when skyrocketing income led consumers to embark on a spending spree. Canadians’ low saving rate and high debt didn’t stop their shopping addiction in the past year, even though economists have raised the alarm about this trend. “Obviously, consumers just ignored all the dire warnings and kept on spending,” said BMO deputy chief economist Doug Porter. With a higher dollar making imported goods more affordable, both consumers and businesses turned to imports to satisfy their demand. However, in the latter half of the year high energy prices took some steam out of consumer spending, he added. Although the GDP figure matched expectations, it shows that “the economy is almost in an ideal place right now,” Porter said. “We’re getting solid growth — not spectacular — but solid,” he said. That’s highlighted by stable inflation rates, big trade and government surpluses, along with robust corporate profits and a continually rising Canadian dollar. “Basically, it’s good news piled on top of good news for the Canadian economy right now.” One downside, though is solid growth is expected to lead to rising interest rates. “I think there’s just enough strength here to convince the Bank of Canada to keep raising rates,” Porter said. “But at the same time the strength is not so overwhelming that the bank has to feel the need to raise rates aggressively, and that’s the good news here.” Both BMO and TD Bank project the Bank of Canada will raise its key interest rate by another half percentage point to four per cent over the next number of months. That move would lead to higher mortgage and borrowing rates and ``will slow interest-sensitive areas of the economy, like some parts of durable spending on the consumer side as well as the housing market,” Gomez said. Growth is expected to continue to be solid next year, at about three per cent, again led by business and consumer spending, Gomez said. The risks will continue to be high energy costs and the potential of a slowdown in the U.S. economy, which could happen in the latter half of this year, he added. Growth, however, won’t be equal across Canada since the rising Canadian dollar continues to depress central Canadian manufacturers but boosts spending on imports while record energy prices aids western Canadian oil and gas companies.