Monday, November 06, 2006

U.S. Housing Slowdown's Impact on Canada

Don’t underestimate the impact here of the bursting of the U.S. housing bubble and the ensuing slowdown of that housing market.

Alan Greenspan said today that home sales and prices may continue to slide for some time, but the broader U.S. economy appears poised for a rebound.

Housing bubbles burst so quickly that the effect is hard to predict.

The world economy is more resilient today than in the past, and is better able to weather weaker conditions but it would be a mistake to underestimate the potential impact of the recent slowing.

It’s important to think of this as a mild, and likely very short-lived, cyclical slowdown for Canada.

The U.S. economy is at the center of weaker global performance. The fallout from the burst U.S. housing market bubble is spreading rapidly to other economies.

There is a 25 % chance the U.S. economy will slip into recession, which it noted would add to the weakness north of the border, to Canada.

Even if the U.S. avoids recession, the world economy will also slow considerably, as will Canada’s.


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