Getty Images

Canada’s annual inflation rate slid to the lowest level in 56 years last month, dropping more than expected for the second straight month to set overall prices 0.9 per cent lower than last year, Statistics Canada reported Wednesday.

The fall on a month-to-month basis was even more dramatic, as prices in July fell 0.3 per cent from the previous month, reversing the similar monthly increase registered in June.

Still, economists say there is little concern that deflation – a broad-based and persistent decline in prices that could inflict further damage on the economy – is setting in Canada, as it did in Japan during the 1990s.

More..

tax

The unpopularity of harmonized sales tax (HST) arises almost entirely because the PST has a long list of exempted items that will now have the PST added to the existing GST.

Here in B.C., the most vocal opposition comes from the tourism and restaurant sectors, already hard hit by the recession and higher dollar. Accommodation will be protected by an offsetting elimination of the hotel tax, but services such as domestic air travel, hair care, dry cleaning, accounting and even funerals will be subject to the additional 7 per cent. New-home buyers will pay the tax on purchases over $400,000 and all homeowners will see the HST applied to cable, telephone, gardening, repairs, renovations and heating fuels.

A recent headline in the Victoria Times Colonist captured the public’s reaction: “HST slams into wall of opposition .” An Ipsos Reid survey found that 85 per cent of respondents opposed the July 1, 2010, HST implementation. And critics’ mischievous portrayal of the move as bailing out big business on the backs of consumers seems to be a dream wedge issue for the Opposition New Democrats.

It’s not that Liberal Premier Campbell couldn’t have anticipated the reaction: Mr. McGuinty has endured similar opposition since Ontario announced sales tax harmonization in May.

More..

The survey, conducted by TNS Canadian Facts, shows their Consumer Confidence Index at 99.2, up 6% from July, when it was at 93.4.

The three subindexes that combine to track overall consumer confidence posted gains during the month, with the Expectations Index seeing the greatest shift: up 8.5 points to 111.1 from 102.6 in July.

The subindex tracks consumer sentiment for the economy, household income and employment in the next six months.

The Present Situation and Buy indexes also increased during the month.

“Consumer confidence has been trending upward since it fell to an all-time low last December,” Michael Antecol, director of the monthly study, said in a release Thursday.

More..

AFP/Getty Images

When the world’s biggest import market crashed last year and economists advised Canadian exporters to chase growth in emerging markets, Winnipeg plastics manufacturer Craig McIntosh did just the opposite: He hired more salespeople and redoubled his efforts south of the border.

Half of Acrylon Plastics’ $40-million in sales come from exports to the world’s biggest economy. But even after watching the U.S. brought to its knees by the recession, Mr. McIntosh stuck with the tried-and-true Canadian export strategy.

The near-collapse of global trade has shone a harsh spotlight on Canadian exporters’ dangerous reliance on customers south of the border. With U.S. demand still in a serious slump, Canada is falling behind in the race to capture a greater share of the world’s markets likely to expand the most over the next decade.

More..

Statistics Canada reported Friday the gross domestic product fell 0.5 per cent in May, pulled down by a battered manufacturing sector and weak demand for energy exports.

It marked the 10th straight month of economic decline.

“Overall, it is clear that activity throttled back significantly in May,” noted Charmaine Buskas, senior economics strategist at TD Securities.

Plant shutdowns in the manufacturing sectors accounted for much of the decline, Statistics Canada said.

About half the decrease was due to a big drop in motor vehicle manufacturing after three months of recovery and a decline in parts production.

“Part of it was obviously related to the auto sector shutdowns,” said RBC chief economist Craig Wright.

More..

Bank of Canada

Currency traders are betting that a U.S. recovery will spark a global recovery “and Canada will be the beneficiary of that,” Bank of Nova Scotia currency strategist Camilla Sutton said this week.

More..

• People Advantage: Canada is a nation of intelligent, educated workers, ranking #1 in the OECD in higher education achievement.
• Business Environment Advantage: The Economic Intelligence Unit has rated Canada the #1 place to do business in the G7 for the next five years.
• Economic Advantage: Canada is better placed than many countries to weather the global financial turbulence and worldwide recession.
• Tax Advantage: Canada offers businesses low tax rates, boasting the lowest payroll taxes among the G7 countries.
• NAFTA Advantage: Canada ’s NAFTA advantage gives investors access to more than 443 million consumers and a combined GDP of more than US$15.4 trillion.
• The Asia-Pacific Gateway and Corridor Initiative (APGCI): Take advantage of Canada’s strategic location as the crossroads between the North American marketplace and the booming economies of Asia

More..

The recession is over, but not the pain.

Canada’s central bank predicted Thursday that the economy would expand this quarter, suggesting the economic contraction lasted for about nine months, considerably shorter than the previous two recessions in the early 1990s and the early 1980s.

The Bank of Canada’s reassessment of the state of the economy is perhaps the clearest signal yet that the worst of the recession is over.

Buoyed by the prospect of better days ahead, investors rushed to buy Canadian stocks, adding new life to an near five-month rally that economists said has played a big role in reversing Canada’s fortunes.

The Standard & Poor’s/TSX Composite Index rose 243.33 points to 10,675.68, the highest in six weeks. Canada’s dollar jumped about 1 per cent to 92.04 U.S. cents, the strongest in almost two months.

Yet Bank of Canada Governor Mark Carney stopped short of celebration, saying it will take more than a year to replace the wealth destroyed by the financial crisis.

More..

Canada’s economic recovery is likely to be far stronger than markets anticipate, a Bay Street economist forecast Wednesday, indicating that a “burst” of 10% growth is possible in the coming quarters.

The prediction from Sheryl King, chief economist and strategist at Merrill Lynch Canada, comes amid fierce debate over what shape the recovery will take following the deepest recession since the Second World War.

“Markets think we are going to get this gradual rise in growth, and then everything is going to be fine,” Ms. King said in an interview. “But business cycles never end like that. You usually get some pop in growth.”

Those who argue that a strong rebound, rather than a slow, weak recovery, is in the offing were handed a key piece of evidence Wednesday when major U.S. credit-card providers, led by American Express Co., reported defaults and delinquencies were less than expected in June. This may signal that U.S. consumers’ credit positions — up until now, the missing piece in the U.S. recovery puzzle — are not deteriorating as rapidly as feared, despite rising unemployment and the continuing housing slump.

More..

The Bank of Canada said on Tuesday that a recovery from the “intense” recession is in the early stages, and as a result it has revised upward its economic outlook for the next year and a half.

Further, in a sign that it believes credit conditions in capital markets have improved, the central bank announced it would make less liquidity available to market participants in special transactions.

In its latest scheduled rate announcement, the central bank, as widely expected, kept its key policy rate at a record low 0.25%, and reiterated its commitment to keep it there until end of June of 2010.

But it provided a slightly more upbeat take on the road ahead, roughly 48 hours before the release Thursday of its quarterly economic forecast – although cautioning that a recovery is “nascent.”

More..