Canada stands firmly in the middle of the road as it enters 2012

Posted by Rumin Mann
January 10th, 2012

I’m not sure what T. S. Eliot would have thought about the matter, but 2011 is closing out with neither a bang nor a whimper. Based on the difficulty of prognosticating over the past couple of years, the author of “The Waste Land” would probably have been glad he was a poet and not an economist. It’s interesting to note, though, that the title of his most famous work certainly could have been applied to much of the world’s financial sector in the most recent recession. It also threatens to have meaning for Europe, if it can’t get its debt problems in order in 2012.

In Canada, most of the recent data series are yielding results that are in the mid-range of historical patterns. The results are neither bullishly high nor bearishly low. For example, retail sales have been steadily increasing, but they haven’t been impulsively buoyant. In the latest month, October, the value of merchandise sold by shopkeepers was 4.4% higher than at the same time last year. A year-over-year sales gain of +5% is the “norm”. In the U.S., through all of 2011 so far, retail sales have been +7% or higher. That’s in a country where a great deal more fuss has been made about the need to scale back “reckless” spending than in this country. It just goes to show how difficult it is to rein in people’s wants and desires.

The inflation rate in Canada (+2.9%) is a little faster than we might like, but it’s still within manageable bounds. The lesson seems to be that central bankers only get truly alarmed about price hikes when they rise above 4.0%. The “core” inflation rate, which omits highly volatile food and energy components, is almost exactly on target at +2.1%.

Housing starts in the latest month (181,100 units annualized) dropped back to where they are more sustainable, in the opinion of most analysts. They rose above 200,000 units several times in the summer and early fall.

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