The outlook for the Canadian economy has weakened somewhat. Real Gross Domestic
Product (GDP) growth for the third quarter fell short of expectations and previous quarters
were revised downward. In the third quarter, a build-up of inventories drove growth � not a
good sign, and net exports dropped by almost half. In October, the merchandise trade
balance fell CAD 600 million to CAD 4.4 billion. The economy is in better shape than the
headline indicators suggest because many were affected by congestion at key ports.
However, it is clear that the recent spike in the currency has had a surprisingly negative
impact on the economy.
A rising currency has affected the economy more than expected, cutting forecasted 2005 growth to 3.2%. Interest-sensitive sectors will remain healthy. Manufacturing has suffered. The labor market stumbled but can recover quickly. The Bank of Canada is on hold until March.
( Full Report, 2 pages, pdf, 25KB ).
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