| General Economic Conditions
The Canadian economy expanded by 4.4 percent in 2000, but growth has slowed down in 2001, with growth averaging 1.2 percent in the first two quarters. While residential investment has slowed-down, business investment has fallen in the first half of the year. Consumer spending is up, but exports have been falling for three consecutive quarters. Sharply lower demand for telecommunications equipment contributed to the largest back-to back decline in machinery and equipment exports in 18 years. However, exports of automotive products surged with stronger demand in the U.S. market.
Activity in the housing sector has continued to grow in the first half of 2001 after posting gains in 1999 and 2000. Investment in residential construction rose 6.5 percent (annual rate) in the first quarter of 2001, and posted an increase of only 0.4 percent in the second quarter. A rebound in housing starts late in the second quarter should boost construction in the next quarter. Housing affordability is being assisted by favourable mortgage rates, job gains in the last two years, tax cuts and income growth.
The total value of building permits in the first seven months of 2001, increased by 13.0 percent to $23.5 billion, compared to the same period of 2000. Advances in both the residential and non-residential sectors contributed to this growth, the strongest since 1989. Residential permits increased 9.3 percent with gains in both the multi-family dwellings (+20.3 percent) and single-family dwellings (+5.4 percent). In the meantime, non-residential permits increased 17.7 percent. On a provincial basis, the largest increases were recorded in Prince Edward Island, Quebec and British Columbia. Only Nova Scotia and Manitoba posted declines. Investment in non-residential construction by the end of the second quarter of 2001 had increased for three consecutive quarters, although the pace of growth has been slowing down slightly. The slowdown was concentrated in the engineering component, which had been posting solid increases in recent quarters. Over the first seven months of 2001, non-residential building permits were up 17.7 percent compared to the same period in 2000, powered by rises in all three components - commercial, industrial and institutional. The Canadian dollar has lost some momentum in recent months. After climbing to U.S.бщ66 early in July, the Canadian dollar gave back most of its gains, closing at U.S. бщ63.84 on September 7, nearing the lows reached three years ago during the Asian financial crisis. |