Starts Slow, Picks Up the Pace Later…

…the Canadian economy, that is. Yesterday, the Canadian Chamber of Commerce came out with similar predictions we’ve been hearing for the past few months–expect GDP to slow down next year! The cause of the slowdown is still the same; that is, the weaker demand for our goods and services from our biggest trade partner–the U.S.

According to the Chamber of Commerce, Canada’s annual growth will drop from 2.8% estimated for 2006 to 2.4% estimated for 2007. The first six months will be particularly slow, but the pace is expected to pick up in the second half. In addition, interest rates are expected to slide in the spring by about 50 basis points, along with new jobs, while the Canadian dollar will continue to flirt with the psychological mark of US$0.90.

According to the report released yesterday, Canada’s short-term economics are suffering first and foremost because of the dramatic slowdown currently gripping the U.S. Approximately 30% of Canada’s GDP is derived from exports to the U.S., which obviously means that any kind of demand slowdown south of the border is bound to make a dent in our GDP.

At least we have the domestic demand to keep pumping our economic growth. Or rather, we had it because domestic demand is also expected to slow down as construction of new homes and job creation declines.

Trade is also bound to take a hit, particularly Canada’s export- sensitive manufacturing industries. They are already having a tough time dealing with a strong Canadian dollar, not to mention cutthroat competition from low cost overseas manufacturers and exorbitantly high costs of raw materials. No wonder that all eyes, ears, and wallets are tuned into the U.S. economy and its expected rebound in the second half of 2007. So, get on with it, friends, you’ve done it before, you can do it again!