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Drop In Canadian Inward Investment

James Boston
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Drop In Canadian Inward Investment

Foreign Portfolio Investment in Canadian Securities has fallen dramatically in the month of June according to Statistics Canada, the inward investment number now stands at -C$1.07Bn compared with $21.43Bn the previous month. The other side of this equation, Canadian Portfolio Investment in Foreign Securities has also been reduced from C$2.03Bn to C$1.96Bn in June.

These figures highlight the falling attractiveness of Canada as a destination for the funds of international investors, but when taken in combination with the recent unexpected increase in the Canadian Trade Balance it is evident that there may still be upward pressure on the Canadian Dollar in the coming months.

Friday’s revision to the July employment numbers provided a surprising but welcome boost to the country’s economic outlook. The 200 new jobs thought to have been created in July turned out to actually be a much more healthy 42,000. Statistics Canada have defended the lapse in data quality as a one off due to human error, it is likely that the agency will be easily forgiven this error due to the positive nature of revision. The overall unemployment rate remained unrevised at 7%, this however still represented an improvement from the 7.1% experienced in June.

One possible explanation for the blip in the calculations is that the Canadian employment market, like that of most developed economies, has undergone a structural shift during the recent crises. Full time employment is not growing at any significant pace, rather part time and contract work is removing individuals from the unemployment claims system. Casual jobs of this nature are much more difficult for the statistical authorities to track and consequently due to the growth in this area the traditional estimation models need to be adjusted. This is an on going process according to Statistics Canada who have admitted that one of the new estimation models failed to update during the recent calculations.

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