U.S. Leads Canada to Economic Recovery

US-recoveryWe’ve all heard the economic saying, “When the U.S. sneezes Canada gets a cold”. Well, the U.S. has been feeling better as of late, accelerating Canada’s recovery as a result. Six years after the financial crisis gripped the world, Canada’s looking south to forecast its economic growth. There’s good reason for it; Canada does 75 per cent of its business with the U.S.

Here’s what Canadians need to know when it comes to our economic relationship with the U.S. and how things are poised for improvement.

U.S. Slow (But Steady) Rebound

The good news is the U.S. added 288,000 jobs in June.  This job growth is well above what the U.S. has been reporting in the first part of 2014. It’s a clear signal that the U.S. is getting back on track. With a lower Canadian dollar, business here can anticipate a pop in sales in the months to come. Canadian goods and services are cheaper than they were last year and there are more people buying.

Big ticket Sales

Canada imports more than $55 billion dollars in vehicles to the U.S. every year. After a slow start to the 2014, vehicle sales in the U.S. were up 1.2 per cent in June.  It’s not a massive bump, but annualized sales are now 16.98 million – the highest pace since 2006, before the financial crisis hit – according to market research firm, Autodata Corp. This is great news for Canada’s struggling auto industry.

Our Biggest Trading Partner

Canada imported $332.1 billion in goods from Canada in 2013, according to U.S. Government figures. It also states that total two-way trade equals $632 billion. Canada is also the U.S.’s largest goods trading partner. The five largest Canadian exports to the U.S. in 2013 were:

–          Crude oil and natural gas: $109.4 billion

–          Vehicles:  $55.7 billion

–          Machinery:  $19.8 billion

–          Plastic: $10.6 billion

–          Other: $10.2 billion

An Important Investor

The U.S. is also a big investor in Canada. In 2012 the U.S. foreign direct investment in Canadian stock was $351.5 billion – up six per cent since 2011. The Toronto Stock Exchange is largely made up of resource and financial companies, both which have continued to do well since 2008. This makes it more attractive for the U.S. to keep investing here. With more Americans working, there’s better opportunity for U.S. dollars being invested in Canadian markets.

Canada Looking Good for 2014

All of these factors are creating a rosier outlook in Canada for the rest of the year. Despite what has been a lengthy journey, Canada can feel encouraged that better days are ahead, and the worst of what the financial crisis brought is behind us. RBC Royal Bank agrees Canada is on a better footing.  The June manufacturing purchasing manager’s index suggested Canadian manufacturers experienced the best conditions for growth in half a year, RBC said. “There is some signs of improvement in the external background, especially the U.S. About 50 per cent of Canadian manufacturing sales are exported and the bulk of that is going to the United States,” says Nathan Janzen, an economist with RBC.

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