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Canada's problems are about to begin Canada's problems are about to begin
(7 months later)
Six out of seven members of the G7 have reported their growth figures for the final three months of 2012 and the news has been uniformly bad. Activity fell in the US, Britain, Japan, Germany, France and Italy, although the drop was so small in America it could easily be revised away.Six out of seven members of the G7 have reported their growth figures for the final three months of 2012 and the news has been uniformly bad. Activity fell in the US, Britain, Japan, Germany, France and Italy, although the drop was so small in America it could easily be revised away.
That just leaves Canada, the land of the tar sands, Mark Carney and – until recently – the sort of hot property market now a dim and distant memory in Britain and the US. Will Canada buck the trend of the rest of the G7 in late 2012? Almost certainly. Growth was just about positive in October and December. Will it be enough to prevent the G7 as a whole having its first negative quarter of growth since the slump of 2009? Almost certainly not, because Canada is not big enough to make a difference when set against declines seen in bigger economies.That just leaves Canada, the land of the tar sands, Mark Carney and – until recently – the sort of hot property market now a dim and distant memory in Britain and the US. Will Canada buck the trend of the rest of the G7 in late 2012? Almost certainly. Growth was just about positive in October and December. Will it be enough to prevent the G7 as a whole having its first negative quarter of growth since the slump of 2009? Almost certainly not, because Canada is not big enough to make a difference when set against declines seen in bigger economies.
What's more, the chances of Canada continuing to outperform its bigger neighbour to the south look remote. US growth was affected in the final three months of 2012 by uncertainty caused by the fiscal cliff negotiations, and will continue to be held back in early 2013 by increases in payroll taxes. But by and large, the US has worked through its problems and looks to be in relatively good shape. Banks have got rid of toxic assets, household indebtedness has been tackled and the lower dollar has made exports more competitive.What's more, the chances of Canada continuing to outperform its bigger neighbour to the south look remote. US growth was affected in the final three months of 2012 by uncertainty caused by the fiscal cliff negotiations, and will continue to be held back in early 2013 by increases in payroll taxes. But by and large, the US has worked through its problems and looks to be in relatively good shape. Banks have got rid of toxic assets, household indebtedness has been tackled and the lower dollar has made exports more competitive.
Canada's problems, by contrast, are about to begin. True, growth has been plumped up by high commodity prices and prospects of slightly faster growth in the global economy during 2013 will help the extractive sector. Canada's banks were better able to cope with the global financial storm. But the real reason growth has been strong is booming property prices. That is about to end. In the US, trends in building permits and housing starts were an early indicator that the party was over: they are now falling fast in Canada.Canada's problems, by contrast, are about to begin. True, growth has been plumped up by high commodity prices and prospects of slightly faster growth in the global economy during 2013 will help the extractive sector. Canada's banks were better able to cope with the global financial storm. But the real reason growth has been strong is booming property prices. That is about to end. In the US, trends in building permits and housing starts were an early indicator that the party was over: they are now falling fast in Canada.
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