The Canadian Economy and You
by Taya Weiszhaar, TMG Mortgage Broker
The Canadian economy shrank in the second quarter of 2011 according to data released by Statistics Canada on Wednesday, August 31. While this might send out alarms for some sectors of the economy, like the stock market, overall, average Canadians need not pay too much attention to the number, according to Benjamin Tal, Senior Economist at CIBC. Most economists agree that the second quarter results were due to a few temporary factors: the supply of automobiles was disrupted because of the Tsunamis in Japan; and Alberta wildfires disrupted oil production.
Even Finance Minister Jim Flaherty noted that the news of the slowdown did not negatively impact the federal government’s plan to stay the course toward balancing the budget. He also said that Canada’s economic and fiscal fundamentals were sound and sustainable.
Bottom line: no recession. The economy did grow strongly in the previous two quarters — plus 3%. And the domestic economy is still strong. The bright side to all of this is that Canadian companies are purchasing equipment and machinery, investing in their infrastructure and hiring. This clearly shows that business is confident about its future prospects.
For example, in Eastern Ontario Nestle just completed a 30,000-sq-ft. expansion to boost production of its sauces, soups and other products. In Burnaby, B.C MonaVie, maker of premier acai based-nutritional products built a new facility with more than 4,000 square feet of warehouse space and 4,300 square feet of office space. Multinational agri-food firm Bunge is expanding its processing plants in Western Canada with a project to more than double its canola crush at Altona, Man. The Altona plant’s processing capacity will be boosted to 2,500 tonnes per day, up from 1,100 currently.
Although Canada is not completely immune to global economic shifts, the country is resilient. The Canadian dollar did react briefly to the news and weakened slightly against the US dollar but has rebounded.
Interest rates, which impacts mortgage rates, are still expected to remain low with some economists predicting no increases to the Bank of Canada’s Prime rate until well into 2012. This is good news for home owners and first time home buyers. With bank Prime rates at 3% and fixed rates at 3.49% for those who have the need and opportunity to borrow, this is a good time.
The Canadian Real Estate Association has also revised its forecast for home sales upward for 2011, citing stronger-than-expected sales and prices in the second quarter and good momentum entering the second half of the year.
The one constant is that global economies are still fragile. However, Canadian fiscal policy has, for the most part, sheltered us somewhat from the doom and gloom happening in countries worldwide. We can be confident, given what has happened so far, our government will continue to monitor events in other countries so that we continue to grow and prosper.
About The Mortgage Group Canada Inc.
TMG Canada is an innovative and progressive mortgage brokerage company. With mortgage professionals serving 9 provinces and 3 territories, TMG is national in its reach helping Canadians navigate their unique mortgage options with over 50 lenders. TMG has a network of more than 800 mortgage brokers and agents and has helped more than 200,000 Canadians arrange their mortgages in the past 20 years.
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