Canada Economy

Thanks to three years of government austerity, a tough anti-inflation stance by the central bank and a boom in trade with the United States, the Canadian economy, which not long ago was derided by international investors as similar to that of a banana republic, may be poised for a long-awaited breakthrough. Recent economic indicators point that way.

Whatever else they've thought about their much smaller neighbor to the north, Americans have almost never looked to Canada as a role model. Indeed, during the long, bitter push to revamp the U.S. healthcare system, opponents repeatedly warned that, if we weren't careful, we could end up with a medical system like Canada's. But on healthcare, as well as on such critical issues as the deficit, unemployment, immigration and prospering in the global economy, Canada seems to be outperforming the United States.

For international economic relationships and hemispheric free-trade agreements, Canada has become a pioneer and a model for other nations adapting to the modern, global economy. More than a decade ago, Canada made a courageous decision to seek a free-trade agreement with the United States. The neighboring nations already had the largest trade relationship in the world because Canada bought more U.S. goods and services--$74 billion a year at that time--than Japan or any other country. And the U.

Canada's unemployment rate rose to 10.6% in August, its highest level since April, 1985, pointing to a sluggish recovery from recession. The number of unemployed rose by 13,000 to 1.46 million, while the number of employed fell 20,000 to 12.34 million, the government agency Statistics Canada said Friday. The jobless rate was 10.5% in July. "The numbers point to a sluggish recovery," said John Clinkard, a Canadian Imperial Bank of Commerce economist.

Canada's Economic Recovery Stalls: Canada's beleaguered economy slowed during the third quarter as its gross domestic product grew a scant 0.2% and the current account deficit hit a record high, Statistics Canada, a government agency, said. The statistics were in sharp contrast to strong second-quarter results that formally ended Canada's recession, economists said.

The Canadian dollar's value is tumbling, but exactly why is anyone's guess. In the meantime, the currency's slide is making Canada a cheaper destination for U.S. tourists. The Canadian dollar on Wednesday reached a record low against the U.S. dollar: One American buck now buys $1.508 Canadian. That's 6% more than the U.S. dollar bought in April and 12% more than in early 1997. To put the numbers in more perspective, a U.S. dollar was worth just $1.10 Canadian in 1992.

Canada's robust economy, powered by strong exports to the United States, could cool in the new year as higher interest rates dampen growth on both sides of the border, economists say, but many experts still expect another banner year for the country. After shrinking for the first two years of the decade, Canada's output has slowly but steadily rebounded, and the nation is forecast to lead growth in the industrialized world in 1995.

Canada's economy rebounded from recession in the second quarter, growing at an annual rate of 4.9% and bringing an end to one of the worst downturns since World War II. Gross domestic product, the total output of goods and services in the economy, had fallen in four consecutive quarters before bouncing back by 1.2% between April and June this year, the federal agency Statistics Canada said Friday. Gross domestic product fell 4.6% on an annualized basis in the first quarter.

After rebounding weakly in the summer and fall, the Canadian economy appears to be sinking back into recession, extending what some say is the worst slump here since the Great Depression. Even before the current slowdown began, Canada had gone through a grueling recession--far longer and deeper than the one in the United States--and had already lost hundreds of thousands of jobs.

Inside the concrete-slab walls of Stage 6 of the Lions Gate Studios is a Spanish-style building that looks like a small California home, down to its red tile roof and backyard barbecue pit. The cozy abode with its neatly trimmed lawn looks as if it once housed a GI returning from World War II and his family, the kind of place that would easily blend into a neighborhood in San Gabriel, Canoga Park or any number of Southern California communities.

Canada cut short-term interest rates Tuesday, a move that may make Hollywood executives happy--but not the rank-and-file workers in Hollywood. The move weakened the Canadian dollar, which has been rallying strongly against the U.S. dollar since mid-March. Between spring 1997 and mid-1998 it was the U.S. dollar that was on top, as its value soared against the Canadian currency--a boon for U.S. TV and movie studios that have moved a significant share of production north.

Evidence of how Asia's sickly yen, won and other currencies have infected Canada abounds in this postcard-perfect setting in the northern Rockies. The tour buses that once delivered visitors by the hundreds from Tokyo and Seoul, fueling a boom that transformed this village into a resort with visions of rivaling Aspen, are fewer and fewer.

The Canadian dollar's value is tumbling, but exactly why is anyone's guess. In the meantime, the currency's slide is making Canada a cheaper destination for U.S. tourists. The Canadian dollar on Wednesday reached a record low against the U.S. dollar: One American buck now buys $1.508 Canadian. That's 6% more than the U.S. dollar bought in April and 12% more than in early 1997. To put the numbers in more perspective, a U.S. dollar was worth just $1.10 Canadian in 1992.

Canada's dollar is near an 11-year low, hammered by Asia's financial turmoil and sliding commodity prices, but economists say the situation is a long way from a crisis and may reverse itself by next year. "This is not a currency crisis. It's not even a currency problem of the sort that we saw in 1995. What you have is a currency languishing at levels that had not been anticipated," said Tim O'Neill, chief economist at Bank of Montreal.

Thanks to three years of government austerity, a tough anti-inflation stance by the central bank and a boom in trade with the United States, the Canadian economy, which not long ago was derided by international investors as similar to that of a banana republic, may be poised for a long-awaited breakthrough. Recent economic indicators point that way.

When Winnipeg graphic artists Jan and Kay Kristiansen decided to go into business this year publishing Recession magazine, they figured that they would be running a humble mom-and-pop operation with a small local following. Instead, Recession has wound up with an initial press run of 20,000, a coast-to-coast subscriber list and profitability from the very first issue.

If Quebec's voters decide in a referendum election Oct. 30 to launch their province toward independence from Canada, would they also be taking the fast track to bankruptcy? And would they drag the rest of Canada down with them? Montreal clothing manufacturer Alvin C. Segal considered these questions the other day as he contemplated the latest poll showing the election in a dead heat. "I'm feeling very uncomfortable," he said. "I have my life invested here."

The country's economic growth, after several months of lackluster performance, will increase in the second half of the year as interest rates fall and consumer demand grows, the Financial Post reported. The Bank of Canada said strong growth in Canadian exports and lower interest rates have spurred increased consumer confidence and a more stable work force.