Canada races ahead in economic growth versus G7 dawdlers

It’s official, Canada is leading the charge out of recession as new data is released today. Amongst G7 nations the economic growth for Q1 and Q2 2010 for Canada far exceeds the other major industrial powers in a report that will prove a boon for business and consumer confidence not just in Canada but North America as a whole. The report is perhaps even better then expected as both the growth indicators and the divide with the other nations both outstrip the indicators previously observed. We’re more than excited with the results and after a prolonged spell of bad news I think its a result that should be shared in every home and business that has been treading the tightrope of caution the last 12 months. Let’s put these figures in perspective, below are the percentages of economic growth for the first two quarters of 2010 in a standings format.

Growth in Canada has outpaced all G7 nations for both composite sets of figures and by a substantial margin. Continuing a trend that has been in place all year the Canadian Dollar remains almost at exact parity with the US Dollar resting at 0.9980 at the time of writing. This despite positive financial reports from the States and the indication that interest rates are under no immediate risk of being increased. Some of the positive US news was tempered bt the Federal Reserve Chairman stating that significant problems are still active with the housing and job market in the US. As I’ve written previously the caution remains so long as the recovery remains essentially jobless which remains the primary concern in the US. Current sentiment suggests that interest rates are more likely to climb in Canada prior to the States which further strengthens the currency in Canada on exchange markets.

Lending more demonstrable evidence to the recovery was the labour market adding some 28,000 jobs in Canada during the month of March. Some analysts concur that without any significant setbacks look to the Bank of Canada to raise interest rates in the middle part of the year. Every statistic needs a point of reference and these G7 reports provide exactly that as the rate of growth in Canada for Q1 is pegged at 6.2% versus the G7 composite average of 1.9% – these are significant gaps.

“Canada is benefiting from its past good policies, in spite of the fact that Canada was severely hit through trade … from south of the border,” OECD chief economist Pier Carlo Padoan

Experts feel that the principles practiced by the Canadian market and government created a stronger platform for both weathering this most recent recession but also enabling a recovery to be more rapid. Cautious growth pre recession coupled with more bank regulation led to a government borrowing far less money. Canada’s overall debt relative to the economy is the lowest in the G7. Padoan noted Canada had entered the recession with stronger fundamentals than its peers in terms of growth, the banking sector and the government’s fiscal position. Canada’s debt relative to its economy is the lowest in the G7.

So where do we go from here? Experts do wave a banner pointing out that a hike in interest rates this Summer will slow the growth as the proven byproduct would show a reduction in spending and loans in tandem with the increase in rates should that occur. Compared with 6,12 or 18 months ago however the overall news should be welcomed and shared with everyone – confidence has long been seen as the fuel which powers the economy and data such as this can only assist.

We’ll keep watching the indicators for you. Meanwhile, how do you feel about the potential increase in interest rates?

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