On Thursday, the Government announced a federal Surplus of 4.2 billion for
this year. The finance minister also projected a surplus of 2 to 4 billion
for the next 5 years. They promised to pass these savings to low income
Canadians by reducing the income tax. On the corporate side the Government
promised to make Canada as the “country with the lowest tax on investment
within the G7". More importantly the finance minister announced his plan to
eliminate its $480 billion of national debt by 2021. No other country
within the G7 has done so well as Canada in recent years.
However, in the short term as we had forecasted, the slow down of U.S
economy has contributed to softening of Canadian economy. For instance,
the sale of machinery and equipment is down by 4%. That suggest that the
“pace of business investment spending in Canada may be starting to
cool”. Retail sale also down by larger than expected 1.2% in September.
This brought gains for the 3rd quarter to 3.8% which represents a slow
down from the block buster sales of 8% in the last quarter. So even
though sale is slowing down, it is still at respectable levels.
Even though the economy is slowing down, inflation is still at 2.3%
which is a bit higher than the Bank of Canada 2% target. “Our forecast
calls for core inflation to edge down in the months ahead, allowing the
Bank to chop rates by 0.5% beginning in April 2007.” Said the TD