All recent indicators of the Canadian economy suggest that the domestic economy is still healthy. Manufacturing shipments, wholesale sales, and retail sales all came in stronger than expected for January. The Ivey Purchasing Managers Index for March (at 65.9 vs. an expected 56.5) was strong in all categories. Also, the housing market continued its current winning streak. Housing starts, although lower in March, ended the first quarter 6.1% higher than the same quarter last year, and the new housing price index grew by a vigorous 0.6% in February. Clouding this rosy picture is the US economy. The outlook for the US economy has deteriorated over the past two months. The negative effect of US weakness can be seen in the 0.9% drop in exports to the US in February. However, with the war in Iraq in its final stages, oil prices falling, and some improvements in retail sales and confidence in March, the US economy is likely to continue growing.
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