S&P sees slow recovery for Canada's economy

(The following statement was released by the rating agency)

Sept 17 - There's growing evidence of an economic recovery in Canada, suggesting the worst of the recession may be behind us according to a report published yesterday by Standard & Poor's Ratings Services. The commentary, "Mixed Economic Signals Point To A Slow Recovery For Canada" notes that we expect GDP growth to begin turning positive in the third quarter of this year. The commentary also notes that the aggressive monetary policy stimulus and extraordinary liquidity provision measures of Canada's central bank in the early days of this recession helped cushion the economy from a more protracted downturn.

"We expect the recovery process to be slow as consumers consider whether to reduce their savings to ramp up spending and businesses remain cautious about adding workers to their payrolls again," said Standard & Poor's fixed income analyst Robert Palombi. "In fact, we believe that labor market conditions pose one of the biggest risks to the outlook," Mr. Palombi added.

However, one positive development has been the slowing pace of job losses in recent months. In the first six months of the downturn, the economy was losing workers at an average rate of about 60,000 per month, whereas by the spring and summer months of 2009, that number had slowed to less than 10,000 per month. This suggests labor market conditions in Canada could be stabilizing sooner, about nine months after the start of this recession, compared with the average of 11 months over the previous three recessions. As a result, it appears that consumer spending could be poised to regain its stride earlier in the post-recession period this time around.

(New York Ratings Team)