Swiss Re cites “resiliency” of Canadian economy

Swiss Re’s August 2004 Canadian Economic Outlook suggests the nation’s economy has shown resiliency despite slowdown in other countries. Swiss Re chief economist Kurt Karl predicts GDP growth of 2.7% for 2004, and 3.5% in 2005 for Canada. He also predicts the Bank of Canada will begin to raise interest rates on September 8, to the tune of 25 basis points, and continue this push through 2005. Among the highlights of Canada’s economy is improvement in the manufacturing sector, where 20,700 jobs were added in July, and shipments rose 1.5% in June.Also strong is the housing sector, despite some slowdown in June, with numbers hinting at a record year for housing starts. Even for 2005, while housing starts will drop 9.5%, prices will continue to rise, to the tune of 4.6%.Job numbers were off in July, with just 8,700 new jobs created versus an expected 28,000. Swiss Re notes that this trend cannot be blamed on U.S. joblessness, as much of the decline comes from the public sector, but the report is quick to note that it is more likely a return to normal job creation numbers, versus the 31,600 monthly average seen over the past year, which was double the twenty-year normal.Also noted is Fitch’s recent upgrade of Canada’s long-term foreign currency sovereign rating to “AAA”, with the rater predicting a federal budget surplus of 0.5% of GDP. The rating, Swiss Re notes, should provide a “modest boost” to Canadian bonds.