Loonie may remain low despite economic improvement

It didn’t long for Prime Minister Harper to embrace a new Gross Domestic Product report, using it to repeat his earlier election campaign claims the Conservatives have the best economic plan for the country.

The report shows the GDP grew point three per cent in July, topping the point two per cent growth economists had expected, and easily putting some credence behind predictions of a third quarter rebound from the economic contraction in the first half of the year.

Mr. Harper says his party’s low-tax, pro-trade, Economic Action Plan is working and the chief economist for Dominion Lending Centres, Sherry Cooper is inclined to agree.

“This just adds to the confirmation that we have seen a rebound in economic activity, at least nationally. Nevertheless as you well know the Alberta economy is in recession and these numbers certainly don’t detract from the pain that’s been very obvious in that region as well as in Newfoundland,” she said.

However, the latest numbers show there was even some summertime expansion in the oil and gas extraction sectors, although not enough to convince her, the recent bust is about to become a boom.

“I think that we can say that the worst is over in terms of the restructuring and the cancelling of so many different investment projects within the oil patch. However there had been a very substantial contraction that was clearly temporary as a result of maintenance shutdowns, as well as wild fire related problems in the oil sector. I sure wouldn’t say things are rebounding.”

In the meantime, Doctor Cooper believes it could be a bah-hum-bug Christmas for those hoping to head south for late year American shopping, following a rebound, in the value of the loonie.

“The federal reserve has made it very clear that they expect they’ll raise interest rates sometime this year which means either in October or at their December meeting. Of course the Bank of Canada will not follow suit for the foreseeable future I would guess for at least a year and that just means further downward pressure on the Canadian dollar which is already beleaguered.”

She sees the loonie, which closed yesterday at 74.93 cents U.S., slipping to about 73 cents over the next year.

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