It seems that Canada's economy didn't generate much growth in May -- it actually contracted by 0.3%! Primary cause was the energy sector, a combination of summer shutdown and very adverse weather (such as huge forest fires) cause the sector to go negative to the tune of 5.2%. For those who don't remember April GDP growth was a big fat zero!
Now that's not to say that the rest of Canada's economy shines a beacon of growth. In fact, the rest of the economy was either flat or exhibited small drop, primary downer number was manufacturing which was down 0.4% for the month.
Obviously the numbers announced by the Americans this morning (Q1/11 GDP number was revised down from 1.9% to 0.4%, and Q2/11 was revised from 1.7% to 1.3%), hardly helped. Canadian interest rate futures are down to 37 bps, which tells you that Canadian interest rates are going nowhere fast, the probability of an increase in Canadian benchmark rates is zero for 2011, and very small for Q1/12 and Q2/12. CAD is ranging in the 1.05/06 range for the past few days -- question in everyone's mind is QE3 -- if the US economy is at stall speed the FEDs may decided that the plunge protection team has to get back on its horse, and counteract the natural direction of the market.