The Canadian Economy
  for the period ending September 30, 2009

In October 2008, as the recession started to impact the economy, the Bank of Canada began cutting its benchmark lending rate to the current historical low of 0.25%. While the Central Bank now expects the Canadian economic recovery will be stronger than originally anticipated, it announced plans to retain current interest rates until the middle of 2010.

Employment increased in August by 27,000 jobs, led by part-time work and the creation of private sector jobs. The unemployment rate currently stands at 8.7%. Since employment peaked in October 2009, a total of 387,000 jobs have been lost (-2.3%). Over the last five months, employment has fallen by 31,000, a much smaller decline than the 357,000 jobs lost during the five months following October 2008.

Consumer confidence continued to rise as the economy and financial markets improved, according to the Conference Board of Canada. When asked if they felt their family would be financially better off six months from now, 27.5% of surveyed Canadians said they did. The portion that expects to be worse off six months from now rose by 1.1% to 12.5%.

Retail sales fell by 0.6% to $34.2 billion in July. Most of the decline reflected the lower prices at gasoline pumps. In volume terms, retail sales edged down 0.1%. Retail sales have risen in five of the first seven months of 2009, following large drops at the end of 2008.

Real Gross Domestic Product (GDP) increased 0.1% in June, the first monthly increase since July 2008.

Investment in residential structures increased 1.7% in the second quarter, halting five consecutive quarterly declines. This rebound offset a decline in the value of new housing construction. Renovation activity was also up 2.2%, after weakening throughout most of 2008.

Exports of goods and services dropped 5.2% in the second quarter, after falling 8.7% in the first quarter. Most categories of goods declined, particularly machinery and equipment, industrial goods and materials, and energy products.

Imports fell 2.2% in the second quarter. This was the fourth quarterly decrease in a row, but the decrease was not as steep as for the previous two quarters. Reduced imports of machinery and equipment, as well as industrial goods and materials, were major contributors to the decline. On the other hand, small increases were recorded in automotive products, ‘other consumer goods’, and agricultural and fish products.

The loonie strengthened against the U.S. dollar during the quarter, reflecting an 8.6% increase. Economists predict favorable exchange rates will be maintained in the near term.

Gold gained 14% this year, achieving its best quarterly performance since the first quarter of 2008. This increase can be attributed to a number of factors including: concerns about inflations; a weakening U.S. dollar (which makes gold relatively more attractive to foreign investors); and a seasonal increase in demand from Asian markets.

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October 28, 2009