CANADIAN ECONOMIC ANALYSIS

Canadian Economic Analysis

[Institution Name]

Canadian Economic Analysis

Introduction

The paper discusses the Canaian economy, focusing on two questions; 1) How successful have the Canadian Government and the Bank of Canada been in running the Canadian economy over the last two years? 2) Evaluate the main macro economic policies used by the Canadian Government and the Bank of Canada over the last two years.

Discussion

The Canadian economy grew at a faster pace than expected in the first quarter of 2010, driven by domestic spending yet. GDP grew by 6.1% year: the largest increase since the last quarter of 1999. This was the third consecutive quarter of economic growth in Canada, after three consecutive quarters of contraction.

According to data from Statistics Canada, consumer spending on goods and services increased by 1.1% in the first quarter of 2010 compared to a 1% increase in the previous quarter. The growth of household spending is concentrated on semi-durable consumer goods, particularly clothing, footwear and accessories. It also increased the purchase of new motor vehicles, but at a much slower pace than in the previous three quarters. Residential investment increased 5.4%, its fourth-straight monthly gain, while construction of new housing rose 11% and reform activity by 6.3%. High prices have strengthened the construction sector and the sectors of furniture and building materials.

Exports increased by 2.9%, the third consecutive quarterly rise after five quarters of decline, driven by the goods and industrial materials and automotive products. Imports increased by 3.4%, also driven by the goods and industrial materials and automotive products as well as machinery and equipment.

In February, the insolvency of companies and individuals, defined as bankruptcy and debt rescheduling, increased relative to the figures for January: 8.2% and 13.4% respectively. However, the results show a clear improvement on-year, convincing evidence that the recovery has taken hold in Canada. Insolvencies fell by 6.7% yoy in February 2010. Consumer insolvencies fell by 5.7% and consumer bankruptcies up 16%. Corporate insolvencies decreased 25.6%, while business bankruptcies fell by 27%. Corporate insolvencies in the 12 months prior to February 28, 2010, fell by 11.6% over the 12 months prior to February 28, 2009. The reduction in insolvencies in agriculture, forestry, fishing and hunting, transport and storage, construction, wholesale trade, and in the sectors of culture and information contributed to this improvement.

In April 2010, the indicator Expected Default Frequency [EDF] of Canada fell again in relation to the previous month, continuing 14 months of fall, and finished 3.3 points below its peak of February 2009. The average EDF Canada currently stands at 1.04%.

The reduction of corporate insolvencies in the fourth quarter 2009 and first quarter of 2010 is an indication of the improving trends in payment cycles, in all business sectors, from mid-2008. The better the Canadian economy as a whole, Credit and Surety provides short term, that defaults continue to decline in Canada. That said, not all sectors share this trend. Most prominently, the sectors of construction and transportation weakest recorded in the payment cycle. The mentality of pay when recovery has ...