Interest rate remains low till next year

As expected, the Bank of Canada recommitted yesterday to leaving its benchmark interest rate at a record low of 0.25% through to the middle of next year.

The central bank is taking a brighter view of the economy, citing stronger-than-expected household spending. Policymakers said that Canada’s GDP would shrink 2.3% this year, compared with an earlier estimate in April that the economy would contract 3%. GDP will expand 3%, compared with an earlier call for growth of 2.5% next year, the BoC said in its latest policy statement.

The revisions reflect what the central bank said are “increasing signs that economic activity has begun to expand in many countries in response to monetary and fiscal policy stimulus and measures to stabilize the global financial system.” Still, the BoC called the recovery “nascent” and emphasized that “effective and resolute policy implementation remains critical to sustained global growth.”

Canadian retail sales rose much more than expected in May after a surprise drop the previous month, Statistics Canada said today. Sales increased 1.2% during the month to $34 billion, with gains in seven of eight sectors, led by a 2.4% increase in automotive products, the federal agency said.

“Retail sales have been generally rising since the beginning of 2009,” Statistics Canada said. Most economists had expected sales to rise by just 0.5% in May after a 0.6% decline in April. – Financial Post

High Gas Prices and the Global Economic Crisis

A Year Later, Pain of $4 Gas Lingers

By BEN ROONEY, CNNMoney.com

NEW YORK (July 17) -- It's been one year since drivers across America were stuck paying the highest gas prices on record, and the memory is not a pleasant one for consumers. Friday marked the anniversary of $4.114-a-gallon gas. It was the highest national average price ever recorded by motorist group AAA, which has conducted a daily survey of up to 100,000 filling stations since 2003.

The surge took a heavy toll on consumers. Not only did the cost of driving jump, but prices for other consumer staples, such as groceries, also shot up as transportation costs increased. In response, consumers drastically cut back on driving and many switched to more fuel-efficient cars.

That led to huge financial losses for automakers. Earlier this year, General Motors and Chrysler, two companies that specialize in full-size automobiles, both declared bankruptcy. Now, the national average stands at $2.481 a gallon, down nearly 40% from last year's peak. Gas prices have fallen for 26 days in a row after climbing to $2.693, the highest level of 2009, on June 21.

While prices average $2.50 a gallon or less in 28 states, gas remains above $3 a gallon in both Hawaii and Alaska, where gas taxes are comparatively high. Analysts say gas prices could continue to fall over the next few weeks. But summer is peak driving season -- not to mention hurricane season in the oil-producing Gulf of Mexico -- and it's possible prices could rebound in August.

"We think that $2.50 a gallon is a pretty good number for consumers to budget their fuel expenditures," said AAA spokesman Geoff Sundstrom. Last year, gas prices were driven higher by a an unprecedented rise in the price of crude oil, which is the main ingredient in gasoline. Oil prices settled at a record $145.29 a barrel one day before the price of gas hit its all-time high.

Oil prices plunged in the second half of 2008 as the global economic crisis unfolded. Gas prices followed suit, with the national average price dropping to about $1.60 a gallon in December.

More recently, crude prices have traded in a range near $60 a barrel as demand for oil-based products remains weak.

2009-07-19 09:56:06