The high dollar and the global slowdown are crushing Canada’s trade-dependent economy.
The latest evidence: The country posted the largest trade deficit in July since Statistics Canada began keeping records in 1971.
It wasn’t just the scale of the gap – $2.3-billion – that jolted analysts. It’s how the economy got there.
Virtually all major exports fell sharply, including energy, autos, agriculture, forest products and machinery-and-equipment. The overall drop was 3.4 per cent, paced by an even larger 5 per cent decline in exports to the U.S. – Canada’s largest customer.
At $2.3-billion, the trade deficit narrowly eclipsed the old mark, set in September 2010.
Scotiabank’s Mr. Holt said the high dollar is most damaging to U.S.-bound exports, which accounted for 72 per cent of all exports in July.
Sorry guys, this is not just a currency issue. This is a global recession, starting in Europe, continuing in Asia and as of June hitting the US. Few even see the US recession yet, but it is here, and Canada will be on the leading edge of it all.
This is not unexpected in this corner, albeit I have for so long predicted the end of the Canadian housing bubble that no one is listening to anything else I have said about Canada.
Those who want to catch up on what is happening in China and how it is guaranteed to affect Canada may consider the following posts.
The three people I am aware of sticking with a recession call right now are John Hussman, Lakshman Achuthan at the ECRI, and me.
Indeed, John Hussman announced yesterday in Late-Stage, High-Risk "I continue to believe that the U.S. joined an unfolding global recession, most probably in June of this year."
In Hussman's post he states a belief backdated downward revisions are coming up. I concur with his analysis.
The collapse in the household survey is an indicator as is the collapse in Canadian exports to the US.
Canada Housing Bubble
100% without a doubt, Canada is in the midst of an immense housing bubble. The Canadian bubble outlasted bubbles in China and Australia. Because it did, I get taunts from Canadian readers all the time.
I received one just yesterday. It went something like this "So Mish, where's your Canada Housing Collapse?"
The answer, as always is "I don't know". That said, bubbles pop by definition. Moreover, the longer the bubble lasts, the bigger the implosion.
Australia is in the midst of a big property bubble collapse, a big retail collapse, and a big export mining collapse all at the same time.
Canada will follow suit at some point and given taunts out of the blue, now is as good a time as any.
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