Last Updated Thu, 08 Aug 2002 17:42:54
OTTAWA - There's growing evidence that the Canadian economy –
which had been holding up well against its struggling U.S. counterpart – may now
be showing signs of a significant slowdown, according to some economists.
For the month of July, the index dropped to 46.5. The decline was unexpected
– economists had been looking for a reading of 53. (Any number below 50
signifies that purchases were lower than the previous month).
BMO Nesbitt Burns chief economist Sherry Cooper said the July reading could
signal trouble for the Canadian economy. "This is the first drop in expenditures
since January, signaling that growth is nowhere near as robust as earlier this
year," she wrote in a morning commentary.
Cooper said other indicators also point to trouble ahead. "The federal
government budget surplus has all but vanished, owing to a marked decline in tax
revenues. Corporate, income and capital gains tax revenues have fallen sharply
in the past year. In addition, the earnings and revenue disappointments at large
Canadian retailers such as The Bay, Zellers and Sears Canada may be early
indicators of consumer belt tightening."
Standard & Poor's MMS technical analyst Katherine Beattie agrees that the
Ivey report shows that the Canadian economy is slowing, "which is not surprising
given the U.S. economic data of late has been very weak."
Still, some data suggest that the economic picture is not all doom-and-gloom.
Statistics Canada reported Thursday that its help-wanted index rose for the
sixth month in a row, signifying that businesses are still ramping up hiring.
And Garry Stamm, a retail analyst with Stamm Economic Research, told CBC
Business News Thursday that he thinks consumer spending in Canada remains
strong. "There isn't any reduction in consumer spending to speak of, or any
downside trend that's evident as of yet," he said. "Employment continues to grow
and grow well in a stable fashion. Second, the weekly earnings, which is your
pay packet, remains on the upside at roughly the rate of inflation. So the
consumer is quite strong in that respect."
Still, there's general agreement that the overall economic picture for Canada
is not as rosy as it was earlier this year. The Bank of Canada is now widely
expected to refrain from raising interest rates again when it issues its next
policy announcement in early September.
Written by CBC News Online staff
The latest
piece of economic data to buttress that view came Thursday morning from the Ivey
Purchasing Managers Index. The index measures purchases, employment,
inventories, supplier deliveries and prices by major Canadian purchasers in the
public and private sectors.
Is the Canadian economy
finally reflecting U.S. weakness?
She told the
Canadian Press news agency that Thursday's U.S. wholesale inflation
numbers, which showed prices falling in July, underline the weakness south of
the border. "Deflation isn't good for anything," she said. "The report adds
credibility to the slowing of the U.S. economy."
THE END
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