Canada’s domestic economy continues to weather the global financial storm relatively well. However, the drag from our all-important export sector will be exacerbated in the coming months by a contraction of demand from the largest OECD economies. The crucial question is the extent to which domestic demand will offset the drag of falling exports. Though tighter credit, a waning household wealth effect and a deterioration of terms of trade will certainly keep a lid on demand, I still believe that a contraction in final domestic demand can be averted. In my opinion, the continued uptrend in real disposable should keep consumer spending afloat until fiscal stimulus kicks in sometimes in the first quarter of 2009. However, a technical GDP recession in Canada will be very difficult to avoid given the export drag caused by the U.S. economic downturn.

Mounir R. El-Ayari, CIM, FCSI, C.h. P. Strategic Wealth
Investment Advisor
Associate Portfolio Manager
e-mail: mounir.el-ayari@nbf.ca