Canada Seeing Slower Growth

Just when it seems like Canada is coming out of the recession, things begin to slow down for the country. While Canada has faired better than the United States, and most other countries for that matter, it still has seen slower than expected growth lately. This is a trend that has been seen throughout North America, with the trade shortfall for the continent falling to the biggest gap seen since October of 2008, considered to be the beginning of the global recession that brought the world’s financial markets to their knees.

The trade deficit of Canada widened to $1.13 billion, which is a huge drop from the $695 million seen the previous month. In addition, June saw a decrease of 2.5 percent in June for exports. What is unfortunate is that the fall in exports came six months after high volumes of exports from Canadian companies that were doing good business.

Sales to the United States also fell by one percent in June, which caused the trade surplus Canada has with their neighbour to fall to $3 billion. In addition, further exports to international countries fell by seven percent, including a 20 percent drop to the European Union. The biggest drop came in exports of gold and other metals, which fell by 24 percent. Imports also fell by 1.2 percent, especially in the area of energy imports, which fell by 19 percent due to lower prices.

What this shows is that many businesses are still investing their money, and consumers are still spending their money, but the demand for goods from Canada has shrunk as a result. Which in turn hurt the Canadian economy because of the massive amount of money that comes in from other countries. Canada has suffered in the past two years because of the United States trouble with the financial crisis. This is in addition to the new policy of the country to buy American, which hurts Canadian exports even more.

Many economists in Canada are worried that the United States could go back into recession very soon because the U.S. Federal Reserve is on deflation and that means a higher risk for recession in the United States.

The Bank of Canada has already stated that the European debt crisis and other problems could cause a .1 percent point off Canada’s GDP this year, a .3 percent point off in 2011 and .2 percent point off in 2012. With growth slowing in Canada from April to June by three percent, those dips in GDP are almost certain to happen.

Overall, many are hoping that Canada continues to be one of the leading countries in the recession. Canada, while it has had some economic trouble, has not seen the same level of problems that were seen in the United States, European Union, or elsewhere. Canada is the only G7 country to raise its interest rates twice, and many hope that this slowdown is just a brief bump in the road for an otherwise rebuilding economy.

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The Performance of the Canada Pension Plan

Mutual Funds 101: Part 1

The Canadian Pension Plan is very important to many people because it serves as a good chunk of their monthly income when they retire. To ensure that the Canada Pension Plan always has money in it, the Canada Pension Plan Investment Board oversees the plan to ensure that it keeps growing to accommodate the growing population of Canada. Under the direction of the Finance Minister at the time, Paul Martin, the CPP Investment Board was created in 1997 as an independent organization that monitors the funds in the CPP and invests them. Every three months it reports on its performance and a professional team oversees the operation of aspects of the CPP fund, while also planning out the direction of the investments.

In order to provide more money to those who will be retiring, especially baby boomers, the Canada Pension Plan Investment Board decided to use 45 percent of its assets to invest in securities located outside of Canada, including in Western Europe and the United States. The Investment Board has also been investing heavily in emerging markets because, as the board states, Canada as one market cannot accommodate the future growth of the pension plan.

According to most estimates, to sustain the population in 2020 that will be using the Canada Pension Plan, the CPP must grow at least 4.1 percent per year. By 2010, the CPP Investment Board had grown to $147 billion. The next 40 years also see some benchmarks for the CPP Reserve Fund that the CPP Investment Board hopes to achieve to accommodate a growing population:

• 2015:  $200 billion
• 2030:  $592 billion
• 2050:  $1.55 trillion

The performance of the CPP has varied in the past few years, as has the CPP Reserve Fund, which grows based on the contributions by Canadians. In the past few years, the CPP Reserve Fund has grown and fallen over the years, seeing a rate of return that was highly fluctuating:

• March 2003 Total Value: $55.6 billion Rate of Return: -1.1 percent
• March 2004 Total Value: $70.5 billion Rate of Return: 10.3 percent
• March 2005 Total Value: $81.3 billion Rate of Return: 8.5 percent
• March 2006 Total Value: $98.0 billion Rate of Return: 15.5 percent
• March 2007 Total Value: $116.6 billion Rate of Return: 12.9 percent
• March 2008 Total Value: $122.7 billion Rate of Return: -.29 percent
• March 2009 Total Value: $105.5 billion Rate of Return: -18.6 percent

The large fall in 2009 was because of the recession that hit the world due to the credit crisis that began in the United States. However, the increase in 2010 was expected to be roughly seven percent, which would allow the CPP Reserve Fund to increase for the first time since 2008.

The Canadian Pension Plan needs to grow at a continuous rate to ensure that there is enough money available for the growing retiring population in Canada. With millions of Baby Boomers retiring and not enough of subsequent generations to prop up the Pension Plan, the Pension Plan needs to grow to ensure everyone has enough money when they retire using the Pension Plan. As long as there are no more years like 2009, it should continue to grow to meet those needs.

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Canada’s Deficit Shrinks

There was some good news from the federal government this week as the government discovered there may be less of a deficit for the economy than was original thought. In February, the government ran with a budget deficit of nearly $1 billion, which would make it the smallest monthly shortfall in the space of a year. Now, with one month left in the fiscal year for the government, it looks like the deficit is going to be less than the $53.8 billion originally estimated by the government. Thanks to the small shortfall within February, and with the surplus from one year earlier that amounted to $817 million, the total shortfall for the fiscal year in Canada is only going to be $40.5. Yes, that is quite a significant number, especially considering that last year the government had a $1.3 billion surplus last year during the same 11 months. However, it is all in how you look at it. The $40.5 billion shortfall is pretty bad, but with it being $13.8 billion less than what was originally expected, you have to consider that to be a win.

The Finance Department considers this good indication that while the economy still is pretty weak, the Action Plan of the government is helping to improve things and lessen the hit that the government and the country are taking from the extended recession that began in late-2008.

Almost half of the deficit came in February when the government began doing economic stimulus spending. During that month, $18 billion was spent to get the economy moving. The government also saw its revenues fall drastically compared with the previous fiscal year. Revenues were down to $16.9 billion, which is a 7.9 percent drop. Program spending increased to $26.4 billion, or by 14.4 percent because of the higher amount of individuals currently on employment insurance payments, as well as the bailout of the automotive industry.

The public debt charge did fall by $1.5 billion thanks to the lower interest rates, which are now increasing as the government tries to stem the incredible growth of the real estate industry to prevent another collapse. In the federal budget released in March, Finance Minister Jim Flaherty announced that there would be spending restraints. Coupled with the stimulus program of the government, this is expected to reduce the deficit of the budget to $27.6 billion by the fiscal year of 2011-12. It is expected that the budget will be balanced by 2014-15.

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Canada 2010 Federal Budget

Finance Minister Jim Flaherty presented Canada federal government’s budget on Thursday, Mar. 04, 2010. I have just finished writing a brief review or highlights of this budget on my other website A Dawn Journal – Canada Personal Finance Blog.

Today, let me take you to my other site for the Canadian Budget Review Article:

Canada 2010 Federal Budget Highlights

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Positive Changes In The Current Canadian Economic and Financial Situation

The Canadian financial events and news is based upon the analysis of a positive change in the current economic and financial situation in Canada. The seventh largest world economy and it is abundant with material wealth and a high-tech industrial society that belongs to the trillion –dollar class. The Canadian financial state and economy is based upon the foreign trade which is for about 2.7 percent of the Gross Domestic Product (GDP). Canada experienced its sixteenth consecutive year with solid domestic growth product, which is dependant largely upon the natural resources, skilled labour force and modern capital industries. The prudent fiscal management has produced consecutive balanced budgets from 1997 till now. 

The global recession caused slackness in the labour market and also has cost Canada some 400,000 jobs. The plunge in the stock market temporarily compounded the thriving community to delay their retirement plans. But the unemployment rate growth and the number of workers available for skilled trades and some occupation dropped. The recession has only provided a temporary stay from the tense labour market of 2007 and 2008 although; the executive action briefing has provided with a statement the labour supply is now plentiful in many industries. The present and forthcoming skill shortages are embedded with the immigration policy and practice, as well as for the use of contract and fleeting workers. In this widespread scarcity, the progressional plans hold the paramount importance throughout the organizations. The strong employment rate remains the same with 380,000 new jobs and the unemployment rate has continued to stay at an average rate of 6.0% this year which is a record low rate.

Canada is in the list of G7 countries, in surplus from 2007 to 2009 as the expectations of the OECD remains. The international trade performances remains stable during the past challenging economic recession. An almost 60% increase in the value of dollar had been observed as compared to the US dollar since 2002. The Canadian dollar is expected to be just average under US $0.96 in 2010. As for a comparison in the past few years, the United States economy as compared to Canadian financial state and economy weakened and the demand of importing Canadian goods has been affected. The export of goods and services increased by 1.9 % in 2007 when it reached by $533 billion dollars and this has improved the Canadian financial state and economy. And the imports also went by an increase of 3.2 % to $503 billion dollars to support the Canadian financial state and economy.

If the Canadian financial experts and economists bring down the rates of finances, the consumer confidence will be raised higher, it shall encourage the consumer to loosen the strings around his purse. It has been speculated that the Bank of Canada may refrain from pushing up high interest rates until mid-year. The all items consumer price index is also moving from deflation to inflation since the retail gasoline prices have been rebounded. As it has been predicted that there will be an over all global recovery of the economic recession the second of 2010, downsizing and capitalization will improve. Over the past three years, the budget surpluses have allowed the government to begin pay down of the national debt of Canada. This also has given the chance to spend more on federal programs and reduce taxes, to the government. The national debt have come to the reduced figure of 19 billion Canadian dollars.

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Canada is among the countries that are seeing an upswing in the economy, with spending up and unemployment down since last year. Canadians are expecting the economy to continue improving since the recession that lasted for three quarters.

Home sales are up for the first time since last year, with an increase of up to 73%. Experts are hesitant to say that the rising prices of homes are a permanent change, however. There are some who worry that the exponential price increases are going to last for only a short period, and that the current real estate market is simply a bubble. New cars sales are among the factors that show the economy is improving.

New car sales have risen over three percent since September, and while sales are still slightly below average they are consistently improving on a monthly basis. There is some controversy over the rising levels of debt among citizens, who are now taking advantage of the lowered interest rates that have been put into place through government initiatives to help fight the recession. Citizen debts are now at an all time high, and even though the numbers of bankruptcies are down by over 27%, there are fears that debt may be increasing too much for citizens.

Despite debt concerns, most business owners remain optimistic about the future. In fact, nearly 70% of business owners are expecting to see an increase in business over the next year. With unemployment down by 8.4%, the business owners have good reason to be optimistic. Canada has experienced an influx of over 30,000 jobs in September alone, providing relief just in time for the upcoming holiday season.

Among the factors influencing the economic recovery in Canada is international trade. US automakers have begun to supply Canada with a fresh stock of automobiles, which have become less readily available since the recession began. Some experts feel that the relief is temporary, and see the unemployment rates rising again in the near future. Others have predicted a trend that will lead to further economic improvement in the country, with expectation of 2.6 percent growth in 2010, and 3.9 percent growth in 2011.

The Canadian and US economy are very closely tied, since the US is Canada’s number one trade partner. The improvement in the US automobile industry has helped to improve the Canadian economy, but there are also trends in the US that will predispose the improvement of the Canadian economy over the next two years. The US economy has been improving, and the impact will be positive for Canada, as well.

Among other factors that are improving the Canadian economy are stimulus spending, an increased budget for infrastructure, and lowered interest rates which are at an all time low. Canadians can expect to see stimulus spending remain steady throughout 2010, which will improve the economy further. The lowest unemployment rates won’t be expected until 2011, although they have continuously been falling and are expected to remain under nine percent throughout the next two years.

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Keep Your Eggs Safe

In easier times, livestock and land managed ones wealth. An old saying “not to count your chickens before they hatch” has remained with us over the years and is still used widely today. In today’s financial turmoil it may appear that, the Global Economy is on a steady up swing yet we are still hesitant to take that deep sigh of relief.

It is fair knowledge in the financial world that the IMF (International Monetary Fund) has recorded that our global recovery is succeeding at an accelerated gain, yet perhaps not as well as some may have hoped. With the unemployment rates, still climbing the up swing can be accounted by the government aid and stimulus packages, which were implemented to stimulate the market. Although overall, our gains are increasing hope in the financial market but on an individual level, many are still in crisis.

Canadians are Confident

With the current economic concerns, it appears that Canadian residents are still maintaining hopeful outlooks towards the financial future and after several months of polls is still on the rise. Canada is also rising in the competitiveness field of Global Banking as surveyed by the World Economic Forum. It is to wonder as to their rise if it is due to their supported confidence. The US remains at the 2^nd spot on the compositeness Global Banking Reports even though their confidence has been reported to be much lower than Canada which was ranked as 9^th, a definite climb for Canada from 13^th place in 2007.

Moreover, one should consider that several polls based on consumer confidence vary widely in terms of questions and statistics but overall Canadian consumers are still more aggressive in the retail markets. Their knowledge to boost the market by spending and maintaining their over all confidence has been noted by several reports. They are the first to step out of the recession and appear to be going strong in the right direction. While their neighbours are more guarded they may be realizing that their border partners may be leading the path to recovery successfully and follow suit.

Other contenders for speedy recovery have been spotlighted with Brazil definitely on the heels of the US and Canadian Markets. Their success can also be measured by the steps taken by the Brazilian Government to aid and boost the economy safely and effectively.

It is still a hazy road at best for most and ways to boost the economy and confidence in spending are being targeted. It is useful knowledge to follow these updates and reports to find we have dodged a very dangerous economic down turn and we are in control of how we manage this swing in the right direction. Safety is key and keeping your egg basket close on the home hearth seems to be the overall advantage in some countries. Many are still skeptical as to how the road to recovery will continue. It is important that the Governments keep maintaining their stimulus support for sometime to ensure the confidence that the World Economy so definitely needs to remain hopeful in this time of such economic uncertainty.

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The Soaring Loonie and Improving Canadian Economy

The improving Canadian economy has got a target in its sights as the country moves towards 2010 with its recession seemingly an ever-dimming memory. That target is the US dollar, which is very nearly in reach of parity with its Canadian counterpart. The strengthening loonie is the latest indicator of an improved national economy, and is a source of a great deal of interest at ground level – not least because it may lead Bank of Canada governor Mark Carney to puncture expectations that he will keep the interest rate at a record low level. This may be a good time for anyone considering taking out a loan to take the plunge.

Carney made the commitment earlier in the year to keep the interest rate at a quarter of a percent until the middle of 2010. This commitment was made at a time when the economy desperately required stimulation, and that kind of stimulation seems to have been provided, and boosted the economy to the point where, paradoxically, a lower interest rate may be difficult to sustain, and where a rise in the interest rate in order to stabilise the climb may be necessary. Carney has pointed out that that pledge was specified at the time to be “an expectation” rather than a specific promise.

This speculation has been heightened in the wake of Australia’s Central Bank deciding to increase its interest rates in the wake of successful stimulus spending in their economy. The number of economies announcing positive results in the last few months has led to a note of caution being sounded with regard to over-optimism in the immediate aftermath of a recession. The US dollar is falling against most currencies, and with the loonie having picked up three cents against its American counterpart it means that the two currencies are now close to absolute parity.

Currencies are given to movement of extreme nature, which can cover a long way in a short time, and when momentum gets behind one and against another, there can be extreme financial consequences. Not wanting to be taken by this momentum to a runaway economy, it would make sense for the Bank of Canada to work in the interests of stability by raising interest rates. Though this may not be popular with borrowers, neither is market instability.

Cheap borrowing for those with the means to get it has been one positive aspect of the largely negative global financial crisis. The return to relative normality, or at least the effective end of the global recession, was always going to have an impact on the level of interest rates. Should the loonie hit parity with the US greenback, there would be little problem, but too much of a change too quickly might have results that would be negative for al parties. Paradoxically, higher interest rates may give the currency at least an initial boost, and given that the central bank has made clear its concern that the Canadian dollar may move too quickly, they have a tough decision to make.

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Consumer Confidence Is Important

For the seventh month in a row – almost unheard of in a global downturn – the consumer confidence felt by surveyed Canadians is on the increase. This was the finding of the latest monthly survey from the Conference Board of Canada, which found that, based on a fairly complicated index of statistics and consumer response, the confidence of Canadians with regard to potential future jobs and larger-scale purchases has rises by two and a half percentage points to break the 90% mark (at a total of 90.9%). Meanwhile, south of the border in the United States, the level of consumer confidence sits at 53.1%. This is due in no small part to the deeper nature of the recession in the States – an economy which is showing recovery, but later and slower than that in place in Canada.

Of course, although these statistics sound great for Canadians and less so for the American public, there is a reason that they are not trumpeted as broadly as harder financial figures. The clue is in the wording of the results and indeed the questions asked. “Confidence” and “sentiment” are hard things to measure exactly. The indices used are based on a lot of different data, and prone to be skewed by false confidence or misguided bullishness depending on the prevailing public opinion of the time. Another survey entirely, carries out by the University of Michigan in collaboration with Reuters, puts the US numbers up at 73.5, on a rise and therefore going in a completely different direction from those of the US Conference Board. Which is right? Possibly both, possibly neither, it depends on the questions asked among many other variables.

However, this is not to say that consumer confidence is unimportant. It most certainly is not, in fact there is a great deal to be said for having a consumer force out there who are confident of earning and ready to spend some money. This in itself helps drive recoveries, and if belief can be spread at such a crucial time it is not something that we should be cynical about. Of course, we’re talking about finance here, so there is going to be cynicism – indeed, if you could bottle a sneer and sell it, the entire global economy could be expanding by multiple percentage points tomorrow – but the knowledge that people are ready to start making purchases again is certainly something to be pleased about.

The pattern of skepticism in our world is something that makes it difficult to read anything into any package of figures released – and more so when the figures contradict each other so frequently. It would be interesting to fast forward into 2011 and see if people are still as dubious about the recovery and how it will hold then. Perhaps this tougher crust will at least enable us to see the warning signs ignored by so many when they were being waved frenetically a few years ago. If not, then this crisis has taught us nothing. What we seem to be seeing in the latest figures is encouraging in that respect – a guarded optimism that takes nothing for granted.

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Canada Welcomes The World

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There has always been a feeling in this world that the near neighbours of the larger or more prominent and influential countries in the world suffer from something of an inferiority complex when placed against their neighbour. As New Zealand is to Australia, as Scotland is to England, there is a feeling that Canada is the poor relation to the United States of America. This feeling comes from nothing more than a cheap, basic reading of the geography and the media profiles of the countries, and is typically quite wide of the mark, but it is still prominent in the way that people talk about the “junior” neighbour. So it should be embraced and celebrated when it is made clear, in any way, that the so-called “little guy” scores a notable success.

For instance, in July the number of people traveling North to Canada from the USA increased by nearly five per cent. There is an increasing feeling that Canada is far from being the “poor relation” here, but rather the more grown-up, sensible alternative to the admittedly attractive superpower with which it shares a border. Since the global financial crisis really dug its claws in (and the vagaries of global trade are such that when it got to one major country its neighbours and trade partners would be affected too), there have been experts in Canada and outside falling over themselves to credit Canada with being uniquely well-positioned to deal with a recession.

Part of Canada’s problem, if it really has one to be concerned with, is that “sensible” is seen as being an unsexy word. There is something of a problem in this world with “dumbing down”, and a country which can claim to be sensible – a highly desirable quality to have, surely – will raise fewer eyebrows than one which can come out, all guns blazing, and promise to really put on a show you will never forget. However, there is now a sense that we are tiring of dumbing down, and that this world has more to offer than the typical and well-worn attractions of the “bigger” neighbours. It is not just Americans who are pouring into Canada. The increase in visitors from Japan in July was a huge 32.4% – and visitors from all over the world increased too.

What this means for Canada is something essentially quite simple. Where there is tourism, there are dollars. As Canada boosts its visitor numbers, it will increase its income from holidaying families and also increase the demand for jobs in its travel sector. This is something that will increase further in the New Year as Vancouver plays host to the Winter Olympics, bringing visitors to Canadian shores in yet greater numbers and showcasing a country that has plenty to be proud of in terms of natural beauty, ease of visiting and a thriving hospitality sector. When Canada welcomes the world, what the world sees is not simply a country which is sensible, but the country that many others would like to be.

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