Economic Climate

.comBubble

20032004

SubprimesCrisis

The 3 main recessions in Canada since 98The dot-com bubble was a speculative bubble around

companies in the IT sector. Over 1999 and Early 2000 Federal Reserve increased interest rates six times it caused the burst of the bubble and a recession wich was particularly

important in North America (USA/Canada)

Increase of imports because of a strong Canadian dollar and opening of the Chinese Market. Oil crisis in the

Middle East the barrel price rose above 30$.

Rise in subprime mortgages deliquencies and foreclosure => Households couldn’t pay anymore their

mortgages. Prices of the houses went down => They couldn’t refinance the first mortgage with a second one => default of

payment => Infinite loop

Canada’s GDP annual growth rate

2000 2001

GDP dropped from 6% (2000) to 0,8%(end 2001)

Demand => accelerator effect => interest rate (1%) => multiplier effect => production (5,2%)

2003 2004

GDP dropped from 3,49% (begin 2003) to 1,5%(end 2003)

2008 2010

GDP growth rate has never been as low as in 2009 with -3,18%

Forecast for 2012OECD sait it expected its members, mostly advanced economies such as Canada, to post growth of 2,3% in 2011 and 3% in 2012

Argentina’s GDP annual growth rate

Canada’s Unemployment Rate2000 2001

GDP => unemployment rate but not in the same proportion. If the GDP dropped by 5,2%, the unemployment rate increased by 1,3%

2003 2004

2008 2010

=> a GDP growth rate so low lead to an unemployment rate very very high : 8,7% in 2009 => +1,8% compared to 2008

GDP => unemployment rate but not in the same proportion. If the GDP dropped by 2,03%, the unemployment rate increased by 0,5%

Forecast for 2012Canada’s unemployment rate is expected to remain steady in 2011-2012, in the high range of 7%

Argentina’s Unemployment Rate

Canada’s Inflation Rate

Forecast for 2012The Bank of Canada aims to keep inflation at the 2% target and if the forecat are right they will reach their monetary policy goal.

2000 2001

Increase from 2,1% to 4%

2003 2004

dropped from 4,4% to 2%

2008 2010

deflation of 0,9%

increase of taxes - decrease of the government budget by 0,1% of the GDP

taxes => demand => GDP => unemployment rate

demand => interest rate + government budget (1,5% of GDP) + subsides

Argentina’s Inflation Rate

Canada’s Current Account

2000 2001

increase from 1,5 billions to 11 billions ($CAN)

2003 2004

dropped from 7,64 billions to 0,7 billions ($CAN)

2008 2010

deficit of 13,7 billions ($CAN)

decrease of imports (-3 billions) and exports (-3 billions $CAN)

expansion of exports (+ 5 billions $CAN) and imports (+3 billions $CAN)

Big dependancy to the United States

Argentina’s Current Account

Canada’s Exchange Rate

2000 2001

CAN$ => exports and imports => exports > imports => surplus => interest rate + government budget => inflation

2003 2004

2008 2010

The Canadian dollar undergoes a depreciation of 0,08$CAN because of the deflation and the decrease of the GDP.

0

0,4

0,8

1,2

1,6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

CAN$ => exports and imports => exports > imports => surplus => interest rate + government budget => inflation

Forecast for 2012The Bank of Canada faces a double issue for 2011 and 2012, they are expecting to increase exports by keeping $CAN low/stable but if they do that the inflation rate will increase

Conclusion

Upward marketDownard marketTRENDS

Since 2000BEAR Market

All the economic indicators

are LINKED togeter=>

=>

Economic Climate