Canada's Growth Surge Isn't Just a Win for Canada
Canada's economy is going from strength to strength. Policy makers should let it keep running hot.
When I wrote that a mooted rate increase in July was good news for Canada and the world, it turns out I wasn't optimistic enough. The rate rise happened, and there may be another soon, but happily one was never going to slow growth down. What people weren't anticipating was the extent of the surge in gross domestic product last quarter.
The 4.5 percent jump clocked in April-June not only surpassed the forecast of every economist surveyed by Bloomberg News, but also powered Canada to the top of the Group of Seven leagues. And that's only weeks after Japan claimed that mantle at 4 percent. Even better than any individual surge is that the world's major economies appear to be undergoing a synchronized upswing.
Not even welcome signs of cooling in Toronto's famously hot housing market have slowed things down in Canada. The world is too interconnected for that; Canada is a major beneficiary of rising world trade volumes and pickups in China and Europe as well as the U.S. The Bank of Canada governor, Stephen Poloz, a former head of Export Development Canada, is keenly aware of this.
And then there is the domestic economy, which is humming along nicely. Not that you can neatly separate internal from external. A burst of consumer spending made a big impact last quarter and pretty much every category -- aside from housing -- performed well.
Poloz played this well. He and his top deputy, Carolyn Wilkins, strongly hinted at a rate increase in July, sending analysts scrambling to catch up. Critically, the central bank delivered. No mixed signals.
Even inflation, while still too low, appears to have hit bottom and is showing signs of heading upward toward the Bank of Canada's 2 percent target.
Another rate increase probably won't dent this expansion. So nice work, Canada. The world is rooting for an encore.
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