Tuesday, September 1, 2009

Recent Growth: Fruit of Governments Actions, But What Happens When Stimulus Stops?

Analysts with the CIBC say that unemployment and weak export will make the recovery shaky until 2010. The governments around thw world appear to have succeeded with their various stimulus packages. They were expected to kick life back into the economy about 6-9 months the fact, and that is exactly what happened. This is good news, as the alternative was much worse. However, nobody should be fooled that economies are strong. What will happen if and when stimulus packages are withdrawn? That is the question.

"It will take approximately twice the time for the Canadian economy to fully recover from the contraction experienced between the fourth quarter of 2008 and the second quarter of 2009." Mr. Lavoie from the CIBC said.

GDP in Canada increased by 0.1% in June, thereby "officially declaring the end of the recession". This should be a joke, but it is what the government is claiming.

"But the economy has a steep hole to climb out of. Real GDP contracted by a worse-than-expected annualized rate of 3.4% in the second quarter, while the decline in the first quarter was revised down to 6.1% from 5.4%, marking the worst quarterly performance on record." "...higher government spending and improved consumption and residential investment offset declines in exports and business investment in the month".

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