Nouriel Roubini's RGE Monitor recently published "Are There Bright Spots Amid the Global Recession?," which provides a comprehensive global economies roundup, and says that Canada's economy will lag that of the US, though it is supported by easier credit conditions, stronger banks, and the commodities recovery.
Canada
Despite relatively sound finances that helped it outperform the rest of the G7 in 2008 and early 2009, Canada’s exposure to the U.S. for trade and investment suggests its recovery may lag that of the U.S. (a trend that Q2 2009 data seems to support). However, a more consolidated financial sector with lower leverage, lower default rates, as well as a revival of domestic demand, should support recovery in 2010, albeit one characterized by below- potential growth. Canadian households and corporations still have more access to credit than their U.S. counterparts, a factor that helped buffer Canada from a more severe property market correction. Yet the nascent revival in consumption may be weaker than the Bank of Canada expects. The rebound in commodity prices is mixed news. Higher commodity prices and greater demand for metals, if not yet for oil and cheap natural gas, should contribute to an expansion of mining and energy output–but too strong a surge could boost the Canadian dollar, exacerbating Canada’s manufacturing weakness as it boosts labor costs.
Source: RGE Monitor, August 5, 2009
