The Bank of Canada put out its quarterly Monetary Policy Report. The outlook for Canada was little changed from October, with the economy expected to return to full capacity in the third quarter of 2011.
And a note of Canadian pride over how well the country has withstood the global recession seemed to seep into the report.
Domestic demand held up much better in Canada than elsewhere, reflecting the soundness of Canada’s banking system, relatively healthy household and corporate balance sheets, and the speed and scale of monetary policy actions.
Global GDP changes
And then there’s the GDP graph from the report. If that doesn’t say “we’ve held up well” I don’t know what does.
The report highlighted the statement of Mark Carney, governor of the Bank of Canada, last December, saying that the recovery would be “more reliant on domestic demand than usual.”
The cause? Canada’s unfortunate neighbor to the South.
At the same time, the persistent strength of the Canadian dollar and the low absolute level of U.S. demand continue to act as signifi cant drags on economic activity in Canada. On balance, these factors have shifted the composition of aggregate demand towards growth in domestic demand and away from net exports.
Let’s hope Canada’s demand holds up as well as expected. The “relatively healthy household” balance sheets could be hit if the housing market falls further than expected, an event that wouldn’t be outside the realm of possibility.
