MacroScope

 All data released last week point to a far better first quarter growth in Canada than previously expected, prompting economists to revise up their predictions.

In a Reuters poll conducted early last month, forecasters predicted that Canada’s economy expanded by just 1.6 percent on an annualised basis in the first three months of this year.

But that consensus could prove to be too low, with many now expecting growth to be close to 2 percent or even higher, likely a welcome sign for Stephen Poloz who was named Bank of Canada’s new governor last Thursday and will replace Mark Carney on June 3.

Last Tuesday brought the first bit of good news, with the monthly gross domestic product (GDP) by industry growing at a faster pace than forecast in February, lifted by strength in potash mining, oil and gas and manufacturing.

Another pleasant surprise came on Thursday when the March report card on trade showed surging exports propelled the country to its first trade surplus in a year.

The European crisis has thinned the ranks of countries considered safe-havens for investors, and may be contributing to an increase in foreign ownership of Canadian assets. Canada, whose comparatively robust banking sector helped it weather the 2008-2009 financial crisis better than many peers, saw capital inflows in July that helped reverse a June decline, according to the latest figures.

Foreigners resumed their net purchases of Canadian securities in July, taking on C$6.67 billion ($6.88 billion) after having reduced their holdings by C$7.76 billion in June, Statistics Canada said on Monday. Canadian authorities have said foreign investors view Canada as a safe haven. So far this year foreigners have made C$41.23 billion in net purchases, a substantial amount though down from C$54.31 billion seen in the first seven months of 2011.

According to Charles St-Arnaud, economist at Nomura, stocks saw their biggest inflow since February 2011:

The St. Louis Fed had a public forum this week to talk about their research into the ailing U.S. jobs market. Not a feel-good scenario.

The bottom line was something the regional Fed bank’s research director Christopher Waller told Reuters in a recent interview: the last three recessions have brought jobless recoveries and this one is no exception. No one can clearly explain why, except that employers are less likely to hire back workers they’ve fired than in the past, and that with so much of the recent downturn due to the collapse of housing, it’s evident that unemployed construction workers can’t easily find new work in, say, nursing or IT.

At this week’s gathering, Waller and his staff fleshed out their research with a number of interesting take-aways. In no particular order:

Not everyone is upset about the 50 percent surge in wheat prices over the past month.

Wheat’s rise to 2-year highs was caused first by heavy rains in Canada and now by a Russian export ban that was triggered by its worst drought in decades. There are floods in Pakistan, another major wheat grower. But while the wheat market shenanigans are triggering much hand-wringing across developing nations, Argentina, one of the world’s top seven wheat exporters, may be set for a windfall.

Farmers there are increasing wheat plantings, the Buenos Aires Grains Exchange says. The South American country is expected to export around 8 million tonnes of wheat in the 2010-2011 year. With wheat futures on the Chicago Board of Trade at around $8 a bushel, a very simple calculation shows export revenues are going to very significant.

By Louise Egan

Canadian Finance Minister Jim Flaherty catapulted to “rock star” status at international meetings in Washington on the weekend, where he took his anti-tax crusade and stared down the powers in Washington and Europe who had plans for a global bank levy.

The Canadians are traditionally peacemakers at these events, building bridges between opposing camps and forging consensus. So when Flaherty stormed into Washington railing against a bank tax being proposed by some of the world’s most powerful leaders in the G20, the reactions ranged from bemused to outright flabbergasted.

“What has happened to the mild-mannered Canadians?” said one bewildered journalist covering the talks among the G20 developing and developed nations.

European Central Bank  President Jean-Claude Trichet plans to keep a cool head at this weekend’s meeting of Group of Seven policymakers in Canada’s far north.

Large iceberg over Frobisher Bay

“I am very happy to go very far up, far up in the north of Canada,” he told journalists before hopping on a plane en-route to frostbitten Iqaluit, some 300 kilometres south of the Arctic Circle.

“We will have all the right environment to be as cool as possible in judging the situation.”

For all the designer drinks and gourmet foods – from raw oysters to sushi, and the sea of men in expensive suits and bejeweled women in elegant gowns, the setting seemed fit only for celebration.

But dressed as they were to the nines, investors attending “A Night with the Bears” at Toronto’s upscale Elgin Theatre, were eager to hear the worst, on the edges of plush seats amid predictions of market doom from some of the continent’s savviest
financial minds.

“I only wish we’d sold tickets,” said a smiling Eric Sprott, arguably Canada’s best known hedge fund manager and chairman at Sprott Asset Management Inc, as he looked out at the 1,500 or so crowd.

Trade protectionism – or at least the threat of it — has raised it head as the global economy has declined, bringing with it all the historical fears about the Great Depression. Consider the flurry of concern about a “Buy American” clause in one of the U.S. stimulus bills.

It is traditionally assumed that widespread protectionism would most hurt the biggest economies, the United States and Japan. But Barclays Capital analyst David Woo says this is not so and that Russia, Canada, Australia and Sweden are the most vulnerable.

Woo studied various factors that would play on the effect of protectionism on a country, from openness and flexibility to its dependence on trade and it savings.