Canada: Economy standing up on its own feet – TD Economics

In view of James Marple, Senior Economist at TD Economics, it is getting more and more difficult to ignore the good news out of the Canadian economy which was evident again last week as labour market data showed a fourth straight month of consensus-busting job growth.

Key Quotes

“The positive turn in economic momentum has come as data in the United States has moved in the opposite direction.”

“The divergence is not just a jobs story. Even with the pullback in exports in February that returned the country’s trade balance to a slight trade deficit (following three months in surplus), Canada’s economy is tracking growth of 3.4% (annualized) in the first quarter. Meanwhile, stateside, real GDP looks to advance by just 1.0%.”

“The worry among policymakers is that Canadian economic growth is built on shaky foundations. Canada has seen false starts before – economic growth started last year with similar spark. However, that was largely an export story, and net-trade is likely to subtract from growth in the year. At the same time, the current strength in key housing markets is unsustainable over the medium term, but there appears little on the horizon to impede near term momentum. Finally, government stimulus dollars should begin translating more meaningfully into activity this year, helping to maintain Canada’s growth trajectory.”

“All told, Canada may have started the year with more slack than its southern neighbor, but the differential is closing swiftly. Even with a slowdown in economic growth relative to its recent torrid pace, slack is likely to continue to diminish. As it does, the case for the Bank of Canada to move off the sidelines will strengthen.”