May 22, 2009 / 7:57 PM / 8 years ago

Flaherty sees "glimmers" of economic hope

3 Min Read

<p>Canadian Finance Minister Jim Flaherty announces new credit card rules at a news conference in Toronto, May 21, 2009.Peter Jones</p>

TORONTO (Reuters) - Canadian Finance Minister Jim Flaherty said on Friday that there are promising hints of a recovery in the domestic economy.

"There are some glimmers of hope. There are some encouraging signs in the Canadian economy. We see retail sales increasing modestly," Flaherty told a business audience in Toronto.

Earlier on Friday, government data showed retail sales rose for a third straight month in March, though the combined increase has not made up for steep drops at the end of 2008.

Signs of improvement can also be seen in consumer confidence levels and in credit markets, while bond markets are "functioning well," Flaherty said.

Equity and currency markets have rallied in recent weeks on growing optimism the global economy may be on the road to recovery.

The Toronto Stock Exchange's S&P/TSX composite index <.GSPTSE has shot up by about 30 percent from its March lows, while the Canadian dollar has risen nearly 17 percent against the greenback over the comparable period.

But even though Canada is well positioned to weather the economic downturn, Flaherty cautioned that 2009 would be a difficult year.

"There are some good signs in the economy and I think that ... we'll see improvement later in the year and into 2010. But this is a difficult year, particularly with respect to unemployment," he said.

Flaherty said April's job numbers were positive, but he cautioned that historically in a recession it is reasonable to see some continuing job losses.

He also said the manufacturing sector, largely concentrated in the provinces of Ontario and Quebec, would likely represent a smaller percentage of the national economy in the future.

Before his speech, the finance minister issued a statement saying he was pleased the International Monetary Fund has endorsed the government's economic action plan that aims to help the country emerge from recession.

Canada's strong policy framework and proactive response has put it in a better position to deal with the global financial crisis than most countries, but it still faces economic difficulties in the near term, the IMF said on Friday.

($1=$1.12 Canadian)

Additional reporting by Ka Yan Ng; editing by Rob Wilson

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