Economic Climate
.comBubble
20032004
SubprimesCrisis
The 3 main recessions in Canada since 98The dot-com bubble was a speculative bubble around
companies in the IT sector. Over 1999 and Early 2000 Federal Reserve increased interest rates six times it caused the burst of the bubble and a recession wich was particularly
important in North America (USA/Canada)
Increase of imports because of a strong Canadian dollar and opening of the Chinese Market. Oil crisis in the
Middle East the barrel price rose above 30$.
Rise in subprime mortgages deliquencies and foreclosure => Households couldn’t pay anymore their
mortgages. Prices of the houses went down => They couldn’t refinance the first mortgage with a second one => default of
payment => Infinite loop
Canada’s GDP annual growth rate
2000 2001
GDP dropped from 6% (2000) to 0,8%(end 2001)
Demand => accelerator effect => interest rate (1%) => multiplier effect => production (5,2%)
2003 2004
GDP dropped from 3,49% (begin 2003) to 1,5%(end 2003)
2008 2010
GDP growth rate has never been as low as in 2009 with -3,18%
Forecast for 2012OECD sait it expected its members, mostly advanced economies such as Canada, to post growth of 2,3% in 2011 and 3% in 2012
Argentina’s GDP annual growth rate
Canada’s Unemployment Rate2000 2001
GDP => unemployment rate but not in the same proportion. If the GDP dropped by 5,2%, the unemployment rate increased by 1,3%
2003 2004
2008 2010
=> a GDP growth rate so low lead to an unemployment rate very very high : 8,7% in 2009 => +1,8% compared to 2008
GDP => unemployment rate but not in the same proportion. If the GDP dropped by 2,03%, the unemployment rate increased by 0,5%
Forecast for 2012Canada’s unemployment rate is expected to remain steady in 2011-2012, in the high range of 7%
Argentina’s Unemployment Rate
Canada’s Inflation Rate
Forecast for 2012The Bank of Canada aims to keep inflation at the 2% target and if the forecat are right they will reach their monetary policy goal.
2000 2001
Increase from 2,1% to 4%
2003 2004
dropped from 4,4% to 2%
2008 2010
deflation of 0,9%
increase of taxes - decrease of the government budget by 0,1% of the GDP
taxes => demand => GDP => unemployment rate
demand => interest rate + government budget (1,5% of GDP) + subsides
Argentina’s Inflation Rate
Canada’s Current Account
2000 2001
increase from 1,5 billions to 11 billions ($CAN)
2003 2004
dropped from 7,64 billions to 0,7 billions ($CAN)
2008 2010
deficit of 13,7 billions ($CAN)
decrease of imports (-3 billions) and exports (-3 billions $CAN)
expansion of exports (+ 5 billions $CAN) and imports (+3 billions $CAN)
Big dependancy to the United States
Argentina’s Current Account
Canada’s Exchange Rate
2000 2001
CAN$ => exports and imports => exports > imports => surplus => interest rate + government budget => inflation
2003 2004
2008 2010
The Canadian dollar undergoes a depreciation of 0,08$CAN because of the deflation and the decrease of the GDP.
0
0,4
0,8
1,2
1,6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
CAN$ => exports and imports => exports > imports => surplus => interest rate + government budget => inflation
Forecast for 2012The Bank of Canada faces a double issue for 2011 and 2012, they are expecting to increase exports by keeping $CAN low/stable but if they do that the inflation rate will increase
Conclusion
Upward marketDownard marketTRENDS
Since 2000BEAR Market
All the economic indicators
are LINKED togeter=>
=>
Economic Climate