Canadian prosperity can withstand U.S. slowdown

Some economists are predicting that this year, Canada may outperform the U.S. According to this article, the reason the U.S. is not doing so well this year is its decline in housing construction and prices. Statistics Canada reports that the value of building permits decreased by 22 per cent in February. However, according to Ted Carmichaels, an economist at J.P. Morgan Securities, he relates the drop as not-so-severe when looking back. He refers to how earlier in the year, the building permit prices were rising at an unsustainable rate, growing even more since January had rather nice weather. As the year edged into February, the weather was too cold for any construction so the permits fell quickly.

In comparison to the year 2006, residential permits have risen 6.6 per cent with non-residential permits up by 45 per cent. This only goes to say that non-residential construction will benefit Canada a large amount, not even counting the other sources that contribute to the GDP. Douglas Porter, an economist at BMO Capital Markets, estimates that U.S. housing construction will decline 16 per cent. For Canada, he predicts a loss of three percent. However, housing prices are still rising in Canada whereas they are falling in the U.S.

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Relationship to Ch. 5 -- Economic Indicators

At the end of the article, it says that Canada's unemployment rate is at its three-decade low of 6.1 per cent. Economic growth is estimated to be 2.4 per cent, although it changes with different economists. Why? Douglas Porter chalks it up to the growing resource sales. Canadian commodities producers are investing heavily in oilsand projects to aluminum. There is more to employment and many are exporting at high prices which affect the GDP greatly. "When business activity is great, prices may rise due to the increased demand for goods and services" is what the textbook says which I believe relates to the article.

It's obvious that construction has seasonal unemployment. While the weather is fine, construction levels go up and so do the prices for permits, which I suppose is inflation of a sort. When colder months approach, both construction and permits go down. I believe that even though there are these months of unemployment, the increase in the productivity during the active months should make up for it. With low unemployment rates and other sources to help boost our GDP, such as exports and more products and services being produced and invested in, Canada should have quite a successful year. Hopefully, the unemployment rates keep declining.