Summary
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Despite having the most highly capitalized banking system in the world, Canada has not been impervious to the financial crisis and has just registered its sharpest decline in real GDP since the 1990 recession.
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Nevertheless, the Canadian economy seems a lot less off balance than its U.S. counterpart. In the previous economic cycle, the consumption-to-GDP ratio attained stratospheric levels in the United States. By contrast, the ratio in Canada is presently at its long-term average. The fact that Canada has a less pressing need to bring this ratio down should translate into a shorter downturn this side of the border.
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After nearly 40 years, U.S. households are now finally on the verge of surpassing Canadian households in terms of savings rate.
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This factor may explain in part why the Bank of Canada expects a solid recovery here in 2010.
