OTTAWA: Canada is likely to avoid being dragged into a US recession this year thanks to the strength of commodity prices, says a CIBC World Markets forecast.
The investment bank said in "Sitting this one out" that Canada's economy has achieved a level of independence from the US thanks to US$100-a-barrel oil and sky-high prices for other commodities that Canada sells to the world.
So while the US is in mild recession, Canada's economy will grow by about 1.6% this year, chief economist Jeff Rubin said, and the pace will pick up to 3% in 2009.
As well, high commodity prices will support the Canadian dollar, and the loonie is forecast to finish this year at about US$1.05.
But while the Canadian economy is not as dependent on America as in the past, it has not decoupled either, the report adds.
Manufacturing, particularly in the auto parts sector, will feel the cold draft coming from reduced US demand this year, keeping Ontario's economy close to flat.
If not for the US recession, Canada's economy would be booming rather than just hovering north of recessionary levels, it states.
Link to http://research.cibcwm.com/res/Eco/EcoResearch.html, and click on "Sitting this one out."

© 2008 The Canadian Press

Businesses forecast slower sales and investment
OTTAWA: The Bank of Canada says businesses are beginning to feel the pinch from tighter credit and are bracing for lower sales and reduced capital investment.
The central bank's spring survey says on balance that businesses reported an increase in sales growth over the past year but conditions recently have been deteriorating slightly.
One of the biggest concerns is tight credit conditions, with 41% of the businesses surveyed saying it has become harder to obtain financing in the past three months. About the same number said access to credit had not changed.
The survey does not indicate Canadian businesses are panicking over the gloomier outlook, but that they expect conditions to worsen slightly across a range of indicators.
A small plurality—38%—expect sales volumes to dip this year, whereas three months ago most businesses were calling for growth.
As well, only about one in four businesses said they expect to spend more on new machinery and equipment this year, and about the same number expect to invest less.
The key positive in the report was that businesses continued to forecast hiring more employees, except in the manufacturing sector.
Link to http://www.bankofcanada.ca/en/bos/index.html.

© 2008 The Canadian Press