Confidence in Canada economic recovery grows

Thu Sep 10, 2009 1:31pm EDT
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By Louise Egan

OTTAWA (Reuters) - Cautious optimism about the end of Canada's recession bloomed into full-fledged confidence on Thursday after the central bank predicted faster-than-expected growth later this year and a report showed a surge in international trade in July.

In a mostly upbeat statement that triggered a rise in the Canadian dollar, the Bank of Canada said expansionary fiscal and monetary policies, improvements in financial markets, higher commodity prices and a return of confidence have buoyed the economy.

As expected, the bank also held its key interest rate at its current 0.25 percent, an historical low meant to stimulate economic growth.

"GDP growth in the second half of 2009 could be stronger than the bank projected in July," the bank said in a statement. It did not say how much stronger.

In July it projected average annualized growth of 2.15 percent in the second half, with 1.3 percent in the third quarter and 3 percent in the fourth.

Also on Thursday, Statistics Canada reported the country posted a near-record trade deficit of C$1.43 billion ($1.32 billion) in July. But analysts said an 8.3 percent rise in imports in the month from June was a sign the economy was starting to recover from the global meltdown.

"By all appearances, the month of July finds Canada riding on the cusp of economic recovery," said Stewart Hall, an economist at HSBC Securities.

The Canadian dollar rose as high as C$1.0793 to the U.S. dollar, or 92.65 U.S. cents, after the reports, up from C$1.0858, or 92.10 U.S. cents, previously.   Continued...