Canada and USA Economy in Recovery

According to economists and government agencies, the downturn in Canada and the US is over.

Heavy spending by consumers has helped lift the North American economy out of a year-long funk, and a recovery is underway, according to a report from TD Bank economist Marc Levesque. A Statistics Canada report last week shows Canadian GDP grew at an annual rate of 2 per cent in the fourth quarter.

TD Bank economist Marc Levesque believes corporate profits will soon follow. "On balance, the downturn in the U.S. economy will go down in history as one of the mildest on record. ... As for Canada, the economy never saw a downturn worthy of the recession moniker in the first place,'' Levesque said.

The building boom in Canada is continuing. Builders broke a 12-year monthly record as they took out $3.8 billion worth of permits in January, a 17.4 per cent increase from December, Statistics Canada reported this week. Permits for single-family dwellings also broke a 12-year-old record, coming in at $1.8 billion, a 24.6 per cent gain over December. Municipalities issued $1.4 billion in permits for non-residential construction, a 6.8 per cent rise from December. Another $561 million in permits were issued for semi-detached and row housing, the agency said.

In the US, orders to U.S. factories rose by 1.6 per cent in January, lifted by stronger demand for cars, computers and machinery, providing new evidence that the battered manufacturing sector is turning a corner. The advance followed a 0.7 per cent rise in December and was the third increase in the past four months, the US Commerce Department reported this week.

A cautiously upbeat economic assessment by Federal Reserve chairman Alan Greenspan was provided to US Congress last week. "Despite the disruptions engendered by the terrorist attacks of Sept. 11, the typical dynamics of the business cycle have reemerged and are prompting a firming in economic activity," Greenspan said in his prepared remarks.

Greenspan also said the spectacular collapse of Enron Corp. could have an impact on the economy if it raises uncertainty about other companies' accounting practices. But that apparently hasn't happened yet, and Enron could be a long-term positive for the reliability of corporate accounting, he said.

The US economy grew much faster in the fourth quarter than initially thought, the US government said last week, bolstered by robust consumer and government spending.
In its second estimate of fourth-quarter gross domestic product (GDP), the Commerce Department said the broadest measure of economic strength grew an estimated 1.4 percent.

"The economy is doing better than anyone three or four months ago thought it could do," said Merrill Lynch chief economist Bruce Steinberg. "While 1.4 percent growth is pretty feeble, it does mean the recession was, from a GDP perspective, the mildest one we ever had." "And the signs since the fourth quarter suggest growth picking up in the first quarter more strongly than most people had anticipated," Steinberg added. "So I would say the recovery is here."