Canadian dollar drops on negative GDP growth

Posted June 4, 2008

Baltimore — (TFN): The Canadian dollar continued to trade below parity as expectations that the Bank of Canada will make a move to cut interest rates intensified.

While Q1 GDP growth for the United States economy — widely believed to be in recession — was upgraded to 0.9% today, Statistics Canada reported Monday that real gross domestic product North of the Border was actually negative. Growth dropped by -0.1% in the first quarter of 2008, its first quarterly decline since the second quarter of 2003.

Canada is the top source of US crude oil imports, ranking even before Saudi Arabia and Mexico. But apparently, neither $135 oil, nor the commodities supercycle… nor the elevated exchange rate versus the U.S. dollar has had a salutory effect on Canadian economic growth.

You should keep this in mind the next time someone claims the the world economy has detached from the United States: The biggest drag on Canada’s economic growth has been a drop in exports to the United States, especially lumber and building-related materials. The effect of the comparatively cheaper U.S. currency on cross-border commerce should also not be underrated

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