US Fears of a Double Dip recession are slowly becoming a reality. Based on Data released on Housing, Employment, construction and manufacturing it is becoming quite clear that things will more likely get worse before they get better with the world’s largest economy facing a huge uphill battle.
One of the main indicators is housing sales which had a 30% month over month decline which happens to be the largest on record. US Unemployment numbers spiked month over month as well so the employment market will remain under stress for some time.
The recovery we thought we had was not accompanied with job growth which is needed for long term growth. A jobless recovery is not practical or likely and the stimulus spending has done nothing more than create a short term recovery. With western governments preparing to tighten their spending and reduce deficits the economy has a chance to remain stagnant, but more than likely will decline.
What does all this mean for Canada, a country that has done relatively well during this crisis and subsequent recession. Well history can tell us that Canada is usually one to two years behind the US since most of our exports go to the US. If this assumption is true then Canada has not really hit the bottom yet. So further economic declines will keep inflation low with a period of deflation possible. Giving the Bank of Canada no reason to raise Toronto mortgage rates in the short term with very modest increases possible in the foreseeable future.
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