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Canadian Wholesale Sales Fall

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Canadian Wholesale Sales Fall

Statistics Canada has just released the March month on month Wholesale Sales data. The figure has fallen this month to -0.4% from 1.1% in February, markets had anticipated a rise of just 0.4%.

The latest projections for the Canadian economy show growth topping 2.3% this year and adding a further 0.2% in each subsequent year to 2.5% in 2015 and 2.7% in 2016. These forecasts are from the IHS Economics think tank which also foresees Canadian unemployment falling to 6.5% by 2016.

The key driver of the strong Canadian growth projections is the recovery in the economy of it’s major trading partner, the US, which accounts for 70% of the exports from it’s North American neighbor. This minimizes, but does not eliminate, the risks to Canada of a slowing in the Chinese economy and question marks over the faltering European recovery.

Domestically Canada is facing the challenge of overheating in the housing market, there are already predictions that the asset bubble that is forming here could sharply correct to the tune of up to 25%. This is an outside prediction but if it plays out would constitute a significant crash that risks stalling or reversing growth in the robust Canadian economy.

The Bank of Canada is now feeling pressure to tighten up bank lending rates in a bid to bring a soft landing to the housing market. This doesn’t suit the monetary authorities who have an economy that is otherwise performing adequately but could benefit from a further extended period of loose monetary conditions, this would ensure that other non housing sectors are given the chance to bed down growth fundamentals. Unemployment at 6.9% for example compares well internationally but has not been falling at a comfortable enough pace, in fact although last months headline reading remained static this did not reflect a slight rise in the number that was masked by rounding.

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