- Joined
- Sep 25, 2007
- Messages
- 201
Hi all,
An article from today`s issue of the Globe and Mail (Report on Business): Excerpts
OTTAWA — In the staid world of economic theory, it was a sexy concept that explained so many things about Canada.
For years, as oil and gas prices rose and the loonie strengthened to allow Canadians to buy more and more goods from abroad with their money, Canada`s income has soared.
Never mind that economic output was slowing considerably. Canada had lots of money - bulging corporate profits, ample government surpluses, jobs aplenty and rising disposable income - because high commodity prices drew in copious amounts of cash and investment.
The concept has a couple of different names - "command GDP" or "gross domestic income."
It measures economic strength by emphasizing what people can buy with their money, rather than the more traditional measure of gross domestic product, which looks at what we produce.
GDI has padded Canadians` pockets for the past five years, but it`s faltering now that commodity prices are softening, the Canadian dollar is trending lower, and the world economy is verging on recession.
The seemingly endless flow of commodities money has become less reliable, and can no longer gloss over the fact that economic output has stalled.
The main factor driving the surge in Canada`s national income was the country`s rising terms of trade.
Terms of trade compare the price a country gets for its exports to the price it pays for its imports. Canada`s terms of trade have been strong because the price of its commodity exports has climbed steadily, while the price it paid for imports has fallen as the loonie gained strength.
With the shine coming off Canada`s glowing terms of trade, the country`s income will take a hit, Mr. Busby said.
The Bank of Canada signalled its focus on GDI in its last full economic outlook in July.
The central bank took the extraordinary step of publishing a forecast for the indicator, showing growth of 3.7 per cent in 2007, and rising to 4 per cent this year, and 4.4 per cent next year, before slowing to 3.3 per cent in 2010.
But that was then, this is now.
But at the Conference Board, where optimism reigns, Pedro Antunes, the director of forecasting, argues for a bit of perspective.
Commodities and the dollar may be off their peaks, he says, but they haven`t dropped back to where they were a year ago.
Canada`s income growth "is going to slow down going forward," he said.
"But there`s still quite a bit of momentum there."
http://www.theglobeandmail.com/servlet/sto...Story/Business/
Keith
An article from today`s issue of the Globe and Mail (Report on Business): Excerpts
OTTAWA — In the staid world of economic theory, it was a sexy concept that explained so many things about Canada.
For years, as oil and gas prices rose and the loonie strengthened to allow Canadians to buy more and more goods from abroad with their money, Canada`s income has soared.
Never mind that economic output was slowing considerably. Canada had lots of money - bulging corporate profits, ample government surpluses, jobs aplenty and rising disposable income - because high commodity prices drew in copious amounts of cash and investment.
The concept has a couple of different names - "command GDP" or "gross domestic income."
It measures economic strength by emphasizing what people can buy with their money, rather than the more traditional measure of gross domestic product, which looks at what we produce.
GDI has padded Canadians` pockets for the past five years, but it`s faltering now that commodity prices are softening, the Canadian dollar is trending lower, and the world economy is verging on recession.
The seemingly endless flow of commodities money has become less reliable, and can no longer gloss over the fact that economic output has stalled.
The main factor driving the surge in Canada`s national income was the country`s rising terms of trade.
Terms of trade compare the price a country gets for its exports to the price it pays for its imports. Canada`s terms of trade have been strong because the price of its commodity exports has climbed steadily, while the price it paid for imports has fallen as the loonie gained strength.
With the shine coming off Canada`s glowing terms of trade, the country`s income will take a hit, Mr. Busby said.
The Bank of Canada signalled its focus on GDI in its last full economic outlook in July.
The central bank took the extraordinary step of publishing a forecast for the indicator, showing growth of 3.7 per cent in 2007, and rising to 4 per cent this year, and 4.4 per cent next year, before slowing to 3.3 per cent in 2010.
But that was then, this is now.
But at the Conference Board, where optimism reigns, Pedro Antunes, the director of forecasting, argues for a bit of perspective.
Commodities and the dollar may be off their peaks, he says, but they haven`t dropped back to where they were a year ago.
Canada`s income growth "is going to slow down going forward," he said.
"But there`s still quite a bit of momentum there."
http://www.theglobeandmail.com/servlet/sto...Story/Business/
Keith