Canadian Packaging Machinery Market Research Report - PMMI

economy. Between January 2002 and February 2003 the Canadian economy
generated 613,000 net new jobs, the largest gain in employment during any fourteen
month period on record back to 1976. Even though the strong labor market induced
an additional 522,000 people to enter the labor force during 2002, the unemployment
rate dropped from 8.0 per cent in December 2001 to 7.4 per cent in January and
February 2003. Historically low interest rates have fuelled consumer spending on
durables, in particular motor vehicles, residential housing, furniture, and appliances.
Solid growth in consumer spending and in residential investment was accompanied
by declines in real exports and in non-residential investment in plant and equipment.
Canada's economy and in particular, its export sector, will be challenged by the rapid
speed with which the Canadian dollar has recently appreciated. The Canadian dollar
rose 15 per cent during the first half of 2003. The Royal Bank of Canada predicts it
will reach 75.2 U.S. cents (or $C1.33 to the U.S. dollar) by the end of 2003 and climb
to 77.5 U.S. cents ($C1.29 to the U.S. dollar) by the end of 2004. It traded at 74.02
cents, or $CDN1.35 to the U.S. dollar on Friday, 19 September 2003. A 75-cent
dollar erases the labor cost advantage Canada has experienced over the U.S. in
recent years. Any further appreciation in the Canada/U.S. exchange rate would tilt
the competitive balance towards U.S. manufacturing in the absence of an increase in
domestic productivity or a decrease in labor costs.
Some of Canada’s key economic indicators are summarized in the following table.
Table 1.5: Canada: Key Economic Indicators
Key Indicators 1999 2000 2001 2002 2003
Real GDP growth (%) 5.1 4.5 1.5 3.4 2.2 1
Exports of Goods & Services (% GDP) 43.0 45.5 43.3 42.2 41.8 2
Unemployment Rate (%) 7.6 6.8 7.2 7.7 8.0 3
Prime Rate (average. %) 6.4 7.3 5.2 4.2 4.50 3
Exchange Rate (C$: U.S. Cents) 67.3 67.3 64.6 63.7 68.0 3
Consumer Price Index (average %) 1.3 1.3 2.0 2.4 2.0 4
Sources: Economist Intelligence Unit; Department of Finance Canada; Statistics
Canada.
Notes: (1) Finance Minister John Manley’s Budget Update, June 2003,
(2) Economist Intelligence Unit estimate.
(3) Department of Finance Canada. The unemployment rate was current as of
August 2003, and the unemployment and prime rates were current as of
September 4, 2003.
(4) Statistics Canada. The consumer price index was current as of August
2003.
1.6 TRADE BARRIERS AND IMPORT DUTIES
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