Flaherty cautious on economy: report

Tue Jul 1, 2008 12:08pm EDT
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TORONTO (Reuters) - Canadian Finance Minister Jim Flaherty said he was concerned that economic weakness in the United States, his country's top trading partner, could hold back the domestic economy in the coming months, a news service reported on Tuesday.

Flaherty said he welcomed Monday's stronger-than-expected report on April gross domestic product, which showed Canada's economy had expanded for the first time in three months.

Even so, "one month does not make a trend," he said in an interview with Canwest News Service.

Flaherty said he was concerned about the impact of the U.S. housing crisis on the economy south of the border and believed the property market would not sort itself out until next year.

Despite the headwinds, Flaherty said he believed Canada's economy could continue to grow, though at a slower pace, due to the country's solid fundamentals and a strong labor market.

A rebound in manufacturing helped Canada's economy grow by 0.4 percent in April after two months of contraction, Statistics Canada reported on Monday. The April performance was slightly more robust that market expectations of a 0.3 percent increase, and it followed contractions in March and February of 0.2 percent and 0.3 percent, respectively.

The Canadian economy shrank by an annualized 0.3 percent in the first three months of the year, the first quarterly contraction since April-June 2003.

Flaherty also said he was still confident that the government would show a budget surplus this year, according to the Canwest News Service report.

It appeared on the website of the Ottawa Citizen newspaper on Tuesday's Canada Day holiday.


(Reporting by Frank McGurty; Editing by James Dalgleish)

<p>Finance Minister Jim Flaherty speaks with the media following his meeting with provincial and territorial ministers of finance in Montreal, May 30, 2008. REUTERS/Christinne Muschi</p>