Federal deficit shrinks to $7.2-billion in 3 month period

[Azure]

Title was misleading, as usual, so I changed it.

Canada’s budget gap is shrinking in line with the government’s projections, the Finance Department said Friday, while cautioning that “considerable uncertainty’’ about the strength of the global recovery means it is too early to reach conclusions about where the deficit will be at the end of the fiscal year.

Through the first three months of the year that started April 1, Canada's deficit sits at $7.2-billion, compared with $12.5-billion in the same period of 2009 when the economy was still in recession. The three-month shortfall is ``broadly consistent’’ with Finance Minister Jim Flaherty’s projection that the $54-billion budget shortfall the government had at the end of the last fiscal year will shrink to just over $49-billion this year, Finance said in its monthly Fiscal Monitor.

The budget deficit for June was $2.8-billion, Finance said, compared with almost $5-billion in the same month a year earlier. The smaller discrepancy came as the government spent less on transfer payments such as employment insurance and aid that had been provided for the automotive industry during the downturn.

For the three-month period, program spending was down 5.5-per-cent on a year-over-year basis, to $54.4-billion, partly reflecting a 6.4-per-cent drop in EI transfers to jobless workers.

The government took in $54.7-billion from April through, a 3.7-per-cent increase over the same three-month period in 2009, in part because of a 54-per-cent gain in sales-tax revenues and also because of higher personal income-tax revenues. However, the government’s intake from corporate income taxes dropped by 10.5 per cent, according to the report.

http://www.theglobeandmail.com/repor...rticle1687627/

Good news, IMO. Tough to not run a deficit in a time of recession, but we seem to be pulling it together. Still think it should be balanced though. Hopefully we can keep this pace going forward, although with the problems the US has who knows what will happen.

[flylock shox]

I think it's pretty much "so far, so good" news.

I'm still waiting for the "double-dip" though...

[CaptainCrunch]

I'm also in the guardedly optimistic. I really don't like the numbers coming out of the States, and our economies are co-dependant for success.

[SeeBass]

I have been quite happy with the way our minority goverment has been going.
It seems to be a good balance.

I do also have fears that eventually we will be dragged down by the finacial cesspool that is the US.

I just hope we can increase our ties with China (human rights aside) as that looks like a horse our resourced based economy needs to hook up with. The wealth in western Canada will rise as the east will stay flat.

[Slava]

Originally Posted by flylock shox

I think it's pretty much "so far, so good" news.

I'm still waiting for the "double-dip" though...

I still think that the double dip won't happen on the balance of probabilities. I would put that at 65/35 with 65 being it not happening.

[IliketoPuck]

I'm cautiously optimistic about the Canadian economy, we have the controls in place to weather the majority of what could come out of the States.

Enough cannot be said about the excellent job Mark Carney is doing for the Canadian banking system. Also Harper and his ability to push through his economic agenda at the G-20 conference in spite of American/British opposition is an excellent indicator that Canada is becoming a model economy to look towards at the moment.

Thankfully the majority of our banks didn't get caught up too badly in the sub-prime fiasco (tsk tsk CIBC), so I think we should be relatively stable going forward.

Although looking at bloomberg every morning it is a bit comical reading the news updates from the states. "Catiously optimistic about (insert slightly positive indicator) signalling recession is behind us." (markets go up). Followed by: "Lower housing starts, speculation on federal rates...etc etc etc. lead to worries the recession may deepen." (market goes down). Repeat 5 times a week in various combinations and you have the bi-polar nature that is the American economy.

I will stay far far away from any American stocks for the forseeable future....but there may be some good opportunities to pick off a couple blue chips if the price is right.

Sorry to digress, but good news in general about the Canadian economy, hopefully we can keep the positive momentum going.

[J pold]

Jim Flaherty has done a great job for Canada.

[IliketoPuck]

I think a lot of very smart people helped get Canada through the recession relatively intact.

[bizaro86]

Originally Posted by Slava

I still think that the double dip won't happen on the balance of probabilities. I would put that at 65/35 with 65 being it not happening.

I would say that its at least 65% chance of not happening. There hasn't been a recession without an inversion of the yield curve in a long, long time, and its not even close to being inverted now.

Michael

[Cowperson]

Originally Posted by bizaro86

I would say that its at least 65% chance of not happening. There hasn't been a recession without an inversion of the yield curve in a long, long time, and its not even close to being inverted now.

Michael

Short rates are rising and longer rates are falling right now . . . . although a long way from being inverted. But that's what's happening.

Historically, it's always this way . . . . a big push out of the bear market followed by an extended period of flatness as markets wait to see if the economy is truly digging in. We're in that flat period now. The TSX is essentially in the same place it was last September.

So far, although we may feel we live in extraordinary times, this has been pretty much bang on with the averages for bear/bull transitions in the post-war period. This has been a pretty ordinary recovery so far. But the flatness could continue for a while.

Double dip recessions are rare.

Amusingly, a few days ago, while rummaging out in a storage area I have out on my acreage, I came across a sealed plastic bin I'd stored some old things the last bunch of years, finally finding that treasured 1979 Newsweek issue I'd bought with the headline "The Gold Rush Of 79," basically centred on the huge jump in gold prices and what it might be signalling. Rather spooky the similarities of conditions described in the article - inflation versus deflation being the difference - and there was a double dip recession still on the way with unemployment higher than today.

Cowperson

[Cowboy89]

Originally Posted by Slava

I still think that the double dip won't happen on the balance of probabilities. I would put that at 65/35 with 65 being it not happening.

I'm with you there too. I think everyone is coming to grips with the fact that due to the housing contraction in the US that consumer spending is going to take a long while to recover. The recent bear market is most likely a rebalancing of expectations towards slow growth over a prolonged period and not necessarily contraction.

That all said with GDP growth lingering below 2% in the US economy which still has a lot of unutilized productive capacity it still doesn't indicate much promise for employment and any major bad news event could send the economy back into recession.

[IliketoPuck]

Originally Posted by Cowboy89

I'm with you there too. I think everyone is coming to grips with the fact that due to the housing contraction in the US that consumer spending is going to take a long while to recover. The recent bear market is most likely a rebalancing of expectations towards slow growth over a prolonged period and not necessarily contraction.

That all said with GDP growth lingering below 2% in the US economy which still has a lot of unutilized productive capacity it still doesn't indicate much promise for employment and any major bad news event could send the economy back into recession.

How susceptible do you think Canada would be if the Americans did in fact slip back into a recession? Obviously our economies are strongly related, but I get the feeling from what I've read and researched that Canada is in a reasonable position to keep out of a double dip.

[Cowperson]

Originally Posted by Cowboy89

I'm with you there too. I think everyone is coming to grips with the fact that due to the housing contraction in the US that consumer spending is going to take a long while to recover. The recent bear market is most likely a rebalancing of expectations towards slow growth over a prolonged period and not necessarily contraction.

That all said with GDP growth lingering below 2% in the US economy which still has a lot of unutilized productive capacity it still doesn't indicate much promise for employment and any major bad news event could send the economy back into recession.

USA businesses are sitting on $1.8 trillion in cash right now.

They're not putting it towards new equipment or employees as they wait to see what Obama does with the regulatory and taxation environments.

There is plenty of ammunition our there to fuel a recovery.

And, if remember right, capacity utilization was also rising precipitously.

But things have definitely stalled out since the late Spring.

Cowperson

[Cowboy89]

Originally Posted by Cowperson

USA businesses are sitting on $1.8 trillion in cash right now.

They're not putting it towards new equipment or employees as they wait to see what Obama does with the regulatory and taxation environments.

There is plenty of ammunition our there to fuel a recovery.

And, if remember right, capacity utilization was also rising precipitously.

But things have definitely stalled out since the late Spring.

Cowperson

I agree there's enough money on the sidelines. Except first things first and that's housing has to stop going into a deflationary spiral. Too many families in the US are behind the 8 ball and in negative equity. That has to change and it might just be a little time with sideways growth for households to shore up their own balance sheets. At some point there will be strong growth and expansionary times ahead.

[bizaro86]

Originally Posted by Cowperson

So far, although we may feel we live in extraordinary times, this has been pretty much bang on with the averages for bear/bull transitions in the post-war period.

Isn't that the truth! Whenver someone is telling you "this time it's different," you know what's coming is at least partially wrong.

Michael