Monday, August 31, 2009

Desperate For Good News

I was surprised (pleasantly I think) by the media's coverage of Canada's GDP numbers. I read a note from RBC this morning that said consensus was that Canada's 2nd quarter GDP would shrink by 3% and that anything worse than that would be negative to the Canadian dollar. Actual 2nd quarter growth fell far short of that and yet the media have jumped on this as a good news story:

Canada's economy grew for the first time in 11 months in June, providing a glimmer of hope at the end of a period that still marked the country's third consecutive quarter of economic contraction.

Gross Domestic Product increased 0.1 per cent in June from May, led by drillers of oil and gas, wholesalers and real estate agents, Statistics Canada reported Monday.

Over the second quarter as a whole, GDP shrank at an annual rate of 3.4 per cent, compared with a contraction of 6.1 per cent in the first three months of the year, as exporters continued to struggle to find markets amid the deepest global downturn since the Second World War.

Statscan's latest GDP figures reinforce the Bank of Canada's outlook. The central bank, led by Governor Mark Carney, predicted last month that Canada's first recession since 1992 would end this quarter and begin a long, slow climb out of the hole created by the financial crisis.

I've gotta commend the media for finding the silver lining. People really are desperate for good news and it looks like we've found it.

Also I've gotta feel for the RBC forecaster, he was right about weaker overall growth in the quarter, but he got the market reaction all wrong.

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