United States |
| The U.S. economy continued its expansion into the first half of 2004,
after posting solid growth last year. Real GDP increased by 4.5% and 3.3% in the first
and second quarters respectively, led by business investment and export growth along with
increased consumer and government spending. Low interest rates, productivity improvements,
higher profit levels, a lower U.S. dollar, and the residual stimulus from last year's tax
cuts provided the impetus for economic growth. Labour markets finally showed signs of
improvement with employment up 0.9% during the first nine months and the unemployment rate
declining to 5.4% in September—down from 6.1% a year earlier. |
| U.S. Current Account Balance
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f: forecast
Economic Research and Analysis Division, Department of Finance |
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The expanding economy combined with
rising core inflation prompted the Federal Reserve Board to begin
raising interest rates in late June. In recent months, however,
record high oil prices and a depreciating U.S. dollar in reaction to
a record current account balance are slowing economic growth. As a
result, further interest rate increases may be put on hold in the
short-run as GDP growth trends to non-inflationary levels. |
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Nevertheless, with interest rates near record lows and the world economy
expanding at a record pace, most forecasters are predicting U.S. GDP growth of 4.3% this year
and 3.5% in 2005. |
Canada |
The Canadian economy continued to grow into the first half of 2004.
Recent growth was broad based—led by exports and business investment and helped along by
consumer and government spending. The strong U.S. economy, in combination with rising commodity
prices, boosted exports while low interest rates, growing profits and lower import prices for
machinery and equipment created a favourable environment for business investment. Real GDP grew by
3.0% and 4.3% in the first and second quarters respectively. Labour markets continued to improve
with employment up by 1.8% during the first nine months of this year. The seasonally adjusted
unemployment rate declined to 7.1% in September from 7.9% a year earlier.
A growing economy, which is now operating near full capacity, and rising core inflation prompted
the Bank of Canada (BOC) to start raising interest rates early in September. The BOC raised rates
again on October 19th and further increases are expected over the next 18 months as the Bank
attempts to control inflation.
Higher interest rates, increased oil prices and an appreciated Canadian dollar (over 80 cents
US at the time of writing) are all factors which may restrain economic growth in the coming months.
However, the positive effects of high commodity prices, a booming world economy, and strong employment
gains should be enough to keep the economy growing at a solid pace. Most forecasters expect real GDP
growth to average roughly 3.0% in both 2004 and 2005. |
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