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Asset slump fingered as central to to recession
OTTAWA - Statistics Canada says the steep decline in asset prices, concentrated in a short period of time, was a bigger factor in driving the country into recession than falling output.
This might explain why Canada`s recession was shorter and milder compared with its industrialized peers, said Philip Cross, chief economic analyst with the data-gathering agency. The Canadian dollar, commodity prices and stock values have all rebounded sharply after they began their descent in the summer of 2008 and reached lows in early 2009. The bounce-back in prices, such as a doubling in crude-oil prices from January of last year, has led to better-than-expected economic growth and prompted the Bank of Canada to set the stage for rate hikes starting next month when it ditches its conditional commitment on rates.
"The 2008-2009 recession in GDP was driven more by prices than volume in Canada, while in the U.S. it was driven more by volume than by prices," Mr. Cross said. "The volume of output is more closely linked to employment; this helps explain why job losses have been more severe in the U.S. than in Canada.... As well, price changes are more easily reversed."
Meanwhile, the pace of change in asset prices was also addressed yesterday by the No. 2 official at the powerful U.S. Federal Reserve. Donald Kohn, in Ottawa to address an economics and monetary-policy conference at Carleton University, said he has "reservations" about central banks hiking interest rates to dampen possible asset bubbles, such as in housing.
This is best left to regulators to examine and keep track of, he added.
Read the full article here.
OTTAWA - Statistics Canada says the steep decline in asset prices, concentrated in a short period of time, was a bigger factor in driving the country into recession than falling output.
This might explain why Canada`s recession was shorter and milder compared with its industrialized peers, said Philip Cross, chief economic analyst with the data-gathering agency. The Canadian dollar, commodity prices and stock values have all rebounded sharply after they began their descent in the summer of 2008 and reached lows in early 2009. The bounce-back in prices, such as a doubling in crude-oil prices from January of last year, has led to better-than-expected economic growth and prompted the Bank of Canada to set the stage for rate hikes starting next month when it ditches its conditional commitment on rates.
"The 2008-2009 recession in GDP was driven more by prices than volume in Canada, while in the U.S. it was driven more by volume than by prices," Mr. Cross said. "The volume of output is more closely linked to employment; this helps explain why job losses have been more severe in the U.S. than in Canada.... As well, price changes are more easily reversed."
Meanwhile, the pace of change in asset prices was also addressed yesterday by the No. 2 official at the powerful U.S. Federal Reserve. Donald Kohn, in Ottawa to address an economics and monetary-policy conference at Carleton University, said he has "reservations" about central banks hiking interest rates to dampen possible asset bubbles, such as in housing.
This is best left to regulators to examine and keep track of, he added.
Read the full article here.