Expressed at an annualized rate, Canada's Q1/11 GDPgrew3.9%, after expanding 3.1% in the fourth quarter of 2010. By comparison, real GDP in the United States grew1.8% in the first quarter of 2011.
Considering that that last week the Federal government announced that its revenues were $6 billion higher than anticipated – reducing the deficit to $24 billion, it surprised no one that Q1/11 GDP growth was around 3.9%. Together with the higher inflation that Canada has been experiencing over the past few months (Core at 1.6% and total at 3.3%), this should give ammunition to the BoC increasing interest rates. However, the market doesn’t believe that interest rate tightening is in the cards until Q1/12 – principally, because the BoC remains concerned about exogenous risk in America, Europe in General and Club Med in particular).
Digging into the data it is evident that manufacturing (we already knew this) is doing very well, manufacturing, mining and oil and gas extraction (effectively the non-service segment of the economy), were the engine of growth for the first quarter.
Although not germane to this analysis it is interesting to note that in Q2/10 the U.S. anticipated Q1/11 growth in excess of 4% and that Canada expected GDP growth, for the same period, of 2.0%. The differences between the two economies are more than cosmetic, Canada's economy is driven by the export of natural resources, and at home has an oligopoly of well capitalized banks, the Canadian housing market is now 6% higher than it was in Q1/07, making the Canadian market expensive (and in the case of Vancouver outrageously so) but also means that Canadians have a sense of wealth when looking at their principal asset (their house). America is a far more diversified economy, and although housing is now an inconsequential proportion of the economy, it is the first "recovery" that America has had which has not relied on housing for its initial growth. Canadian employment has recovered from the recession (although we still have not taken account of population growth), where as America still faces a 6 million job.
Considering that that last week the Federal government announced that its revenues were $6 billion higher than anticipated – reducing the deficit to $24 billion, it surprised no one that Q1/11 GDP growth was around 3.9%. Together with the higher inflation that Canada has been experiencing over the past few months (Core at 1.6% and total at 3.3%), this should give ammunition to the BoC increasing interest rates. However, the market doesn’t believe that interest rate tightening is in the cards until Q1/12 – principally, because the BoC remains concerned about exogenous risk in America, Europe in General and Club Med in particular).
Digging into the data it is evident that manufacturing (we already knew this) is doing very well, manufacturing, mining and oil and gas extraction (effectively the non-service segment of the economy), were the engine of growth for the first quarter.
Although not germane to this analysis it is interesting to note that in Q2/10 the U.S. anticipated Q1/11 growth in excess of 4% and that Canada expected GDP growth, for the same period, of 2.0%. The differences between the two economies are more than cosmetic, Canada's economy is driven by the export of natural resources, and at home has an oligopoly of well capitalized banks, the Canadian housing market is now 6% higher than it was in Q1/07, making the Canadian market expensive (and in the case of Vancouver outrageously so) but also means that Canadians have a sense of wealth when looking at their principal asset (their house). America is a far more diversified economy, and although housing is now an inconsequential proportion of the economy, it is the first "recovery" that America has had which has not relied on housing for its initial growth. Canadian employment has recovered from the recession (although we still have not taken account of population growth), where as America still faces a 6 million job.