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Strategies & Market Trends : Ride the Tiger with CD -- Ignore unavailable to you. Want to Upgrade?

To: Rocket Red who wrote (124365)	7/21/2008 12:12:41 PM
From: Rocket Red	Respond to of 314057

Canada well-placed to weather economic storm: Scotiabank VIRGINIA GALT Monday, July 21, 2008 Canada is better placed than many industrialized countries to shelter itself from “the gathering U.S. economic storm,” Bank of Nova Scotia said Monday in a report on the global economic outlook. Rising commodity prices are bolstering Canadian exports, a “legacy of household caution” kept Canadian consumers from being swept up in the subprime mortgage crisis that has convulsed global financial markets, and the commitment of Canadian governments to balanced budgets “is now proving to be an important national strategic advantage,” the bank's economists said. Still, it will be “a long and winding road” to global economic recovery, with growth expected to slow even further in 2009 before the world's major economic players start gaining traction again, according to their projections. “We expect United States growth in 2009 to be even weaker than this year's paltry 1.5 per cent advance,” chief economist Warren Jestin said in releasing the bank's global outlook report. “Growth is unlikely to reach 1.5 per cent in Japan through 2008-2009 and is expected to fall to this level in the U.K. and Europe over the next year,” Mr. Jestin said. Canada, in turn, is being dragged down by “weakening U.S. demand, the loonie's return to parity and exceptionally high oil and gas prices,” he said. “Canadian output growth will probably not exceed the U.S. outcome in 2008, because inventory swings and weather-related disruptions triggered a mild contraction on this side of the border at the beginning of this year, and massive fiscal stimulus is temporarily levitating U.S. demand,” Mr. Jestin wrote. “Difficult adjustments in the auto sector also are bound to impose a significant challenge in both countries.” However, the report noted, the loss in Canadian manufacturing exports has been cushioned by a big run-up in commodity receipts, which now represent more than half the value of merchandise exports. “Over the past year, Canada's trade surplus in commodities totalled $117-billion, roughly one-and-a-half times the combined deficits in other trade categories. The dramatic rise in commodity sales also has coincided with a diminution in Canada's reliance on U.S. markets, which this year will absorb roughly 77 per cent of Canadian exports compared with a peak of 84 per cent just over half a decade ago,” the economists said in outlining some of Canada's economic advantages. “Unlike U.S. households that increasingly relied on home equity withdrawals to underwrite spending, Canadians have tended to build equity in their homes over the past decade. The levering up of higher-risk households that eventually precipitated the subprime mortgage crisis and credit crunch was not replicated on this side of the border. “While Canadian residential construction is down about 10 per cent from the peak reached two years ago and both sales and prices are likely to soften over the next year, residential activity will continue to be much less of a drag on overall growth,” the bank said in its report. “Canada's fortuitous position as a major commodity producer, its strategic advantage in government finance and its legacy of household caution with respect to leverage have helped to shelter domestic activity from the gathering U.S. economic storm,” Mr. Jestin said in releasing the outlook. © Copyright The Globe and Mail