U.S. and Canadian economies on diverging paths

New currency, commodities, jobs and trade reports and figures released last week have shown signs of an impending major bifurcation between the U.S. and Canadian economies, analysts said.

In the event of such a divergence, experts warned, Canada will bear the brunt of the effects as the smaller partner – a stark contrast to the situation around six years ago, when the U.S. economy was reeling from the recession and it had to lean on Canada to fulfill its demand for oil, iron, and copper.

The recent collapse of Canada’s mineral resources sector has changed all that: Canada is now in a phase where it makes far more than it can process or use. Compounding the issue is the major damage dealt to the heavy oil industry by the sharp drop in oil valuation in 2015, leading to fears that the Canadian oil sector won’t recover quickly enough.

To compare, the U.S. economy remains very active in acquiring resources and processing these into high-value products (e.g. turning cheap oil into expensive gasoline).

Federal Reserve chair Janet Yellen has confirmed the central banking system’s end goal of increasing interest rates amid the U.S. economy’s steady approach to full capacity.

“I think the economy is on the road to recovery. We're doing well,” said Yellen.

Canadian authorities, on the other hand, cited “challenging economic times” ahead, as the markets’ gradual downward spiral has shown no signs of stopping for now.

MBN

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