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: Cogito Ergo Sum who wrote (45162)	11/25/2008 3:12:19 PM
From: Johnny Canuck	Respond to of 71756

Canada in recession, heading for deficit: OECD Peter O'Neil, Europe Correspondent, Canwest News Service Published: Tuesday, November 25, 2008 PARIS - Canada is now in a recession that will likely lead to a federal deficit, but the plunge into the red "is not alarming" because Canada's relatively strong banking sector and healthy government finances leave the country in decent shape to manage the global financial crisis, according to a major report released Tuesday. Canada's economy is shrinking because of its close ties to the U.S. as well as its vulnerability to sliding world commodity prices, said Klaus Schmidt-Hebbel, chief economist for the Organization for Economic Cooperation and Development. "In our scenario, Canada is severely affected by these two factors and therefore we have a very significant recession for the case of Canada, which mainly we've projected to have started already in the fourth quarter of this year, and going on for the next two quarters until mid-2009," he told a news conference in Paris after presenting the OECD's latest economic outlook. Canada's GDP will shrink 1.4 per cent in the first quarter of 2009, the OECD report projected. Canada's GDP will shrink 1.4 per cent in the first quarter of 2009, the OECD report projected. Chris Wattie/Reuters Email to a friendEmail to a friendPrinter friendlyPrinter friendly Font: * * * * * * * * AddThis Social Bookmark Button The Ontario-based auto sector and the B.C.-dominated forest products industries will be particularly hard hit by the deeper recession being experienced in the U.S., said Andrew Dean, Andrew Dean, the OECD's deputy director of country studies. The OECD economists said fiscal stimulus programs around the world aimed at the banking sector, combined with lower interest rates, are crucial to prevent even deeper pain. But they warned against rescue plans for specific industries or sectors, including North American and European car manufacturers. "Once you start giving support to one corporation or one sector, where are you going to stop? If you start with the car industry why would you not go to the service industry affected by the recession, or the construction industry, or consumer goods more generally?" Schmidt-Hebbel said. He noted that if an auto company fails consumers will simply buy cars from other companies, boosting their health. But if banks and other financial institutions collapse the negative trickle-down ramifications are magnified. Canada's economy is projected to shrink 1.6 per cent in the current quarter, bringing the overall growth of gross domestic product in 2008 to 0.5 per cent, the OECD report said. Canada's GDP, which measures the economy's size in terms of the value of goods and services produced, will shrink another 1.4 per cent in the first quarter of 2009 and by 0.3 per cent in the second quarter, the report said. The economy will start growing again in the second half of next year, it said, but the sluggish start means the overall GDP rate for 2009 is expected to slide by 0.5 per cent. "The domestic banking and housing sectors are in relatively good shape, and no government bailouts have taken place," the OECD noted. Lower commodity prices, by easing inflation, will also give the Bank of Canada considerable room to lower interest rates in order to stimulate the economy. "The general government is expected to move into deficit in 2009 and 2010, a largely cyclical outcome that is not alarming and leaves room to absorb eventualities, but underlines the need to keep a lid on discretionary expenditure increases," stated the report by the OECD, which provides economic advice to Europe, North America, and to developed democracies in the Pacific region such as Australia, New Zealand, South Korea and Japan. The report praised Canada's relatively tight banking regulations which have left it better-capitalized and with fewer toxic assets. The asset-to-capital ratio in Canada is 18 compared to 25 for the U.S., more than 30 for European banks, and above 40 for some major global banks. Canada also has far fewer risky mortgages than the U.S.