Current economic conditions

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The resurgence of overseas demand at a time of slower growth in the United States was reflected in the distribution of our exports, where a pickup in shipments abroad partly offset a drop to the United States over the past year.

In fact, shipments to the United States dipped 0.3% in the past year despite gains in energy, but total exports continued to grow thanks to gains of 22% to the European Union and 12% to Japan.

The current account surplus was cut in half in the second quarter, mostly due to a falling surplus in merchandise trade. The non-energy trade balance slipped into a small deficit for the first time since 1992, the result of lower exports (especially forestry products) and strong import demand.

Domestic demand remained robust except for a dip in construction in the second quarter. The simultaneous drop of both residential and non-residential building suggests that weather, and not economic forces, played a major role in slowing construction activities. Construction had soared in the first quarter when temperatures were unusually mild, and activity returned to more normal levels in the second.

Housing starts and building permits point to a resumption of growth during the summer. Housing prices remain strong, up 10% from last year, in marked contrast with the sharp deceleration in the United States. Much of the strength in Canada originated in the West.

Residential building and renovations rose 8.5% in the year ending in the second quarter. Nominally, this represents a healthy gain. But growth was increasingly concentrated in the West: excluding Alberta's 36% gain, growth would have been 4.8%, or only slightly more than in the United States. And without British Columbia's 23% increase, growth would have been only 1.5%.

Nominal growth in Western Canada's housing industry was increasingly driven by higher prices. New housing prices in Calgary were 56% higher than July 2005, while Edmonton was up 30%. As a result, the overall implicit price index for housing rose 6.2% in the past year, double the rate in mid-2005.

Definitions, data sources and methods: survey numbers, including related surveys, 1301, 1901, 2152, 2306, 2406 and 3701.

The print version of the September 2006 issue of Canadian Economic Observer, Vol. 19, no. 9 (11-010-XPB, $25/$243) is now available. This issue summarizes the major economic events that occurred in August and presents an article entitled "The Alberta economic juggernaut: The boom on the rose."

For more information, or to enquire about the concepts, methods or data quality of this release, contact Philip Cross (613-951-9162; ceo@statcan.gc.ca), Current Economic Analysis Group.