Canada soaring amid us misery

The USA is on the verge of economic recession, but Canada is unfazed and untouched…

With manageable inflation, a Government rich enough to open the fiscal floodgates, and most importantly, consumers in robust health, Canada is well-placed to withstand a U.S. slump.

David Wolf, Merrill Lynch's Canadian analyst forecast Canadian real GDP would trough at 1.3% year-over-year in the third quarter, down from 2.9% in the fourth quarter of 2007 and a nearby peak of 3.6% in the first quarter of 2006.

Canada’s robust history

In the 2001 U.S. recession by contrast, Canadian growth fell to just 0.7% from the cyclical peak of 5.9% in the fourth quarter of 1999. And history has been much less kind, with Canada suffering interminably during the early 1990s recession as the U.S. economy bounced back.

Indeed, in the six previous recessions of the past forty years, Canada has followed suit four times (1969-70 and 2001 being the exceptions), Mr. Wolf said. The average peak-to-trough drop in real GDP was 6.7 percentage points.

Canada's housing market looks nothing like the United States, with activity and prices still rising and crucially owner's equity - which could be tapped for spending - running over 70% compared about 50% for the United States where it has shrivelled from 55% in mid-2005.