Behind the Headlines August, 2006

Article Excerpt

Stock market indexes in Canada and the U.S. are up only 4% or so this year. But that disguises the underlying strength of the global economy. U.S. growth was an annulized 2.5% in the second quarter of this year. While that’s down from 5.6% in the first quarter, it’s still strong considering that the U.S. Federal Reserve has continued to raise interest rates to control inflation. Higher rates have slowed consumer spending and red-hot housing markets. In Canada, annualized growth was likely just under 2% in the second quarter. Declines in energy, mining and construction offset gains by service industries. Growth was 3.8% in the first quarter. Following seven consecutive rate hikes, the Bank of Canada is responding to this slower growth by holding interest rates steady. The U.S. Fed is also expected to pause. Steady or even lower interest rates should help sustain the economic recovery, as well as keep unemployment low and boost consumer and business confidence. Elsewhere around the world, China and…

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