U.S. Slump Threatens Canadian Recovery

A slowdown in U.S. economic activity is threatening to derail Canada’s fragile recovery, which has hinged almost entirely on exports to its southern neighbor, economists say.

Most areas in the Canadian economy are running far below capacity, with consumer confidence at historic lows and bankruptcies at record highs.

Canadian economists had pinned hopes of recovery on strength in the United States. But recent data there have imperiled that forecast.

In June, U.S. unemployment soared to 7.8%, payrolls shrank for the first time in five months, consumer confidence slipped and factories rolled back their purchasing plans.

“The large job slide south of the border puts at risk the view that we can rely on the U.S. to kick-start the Canadian economy on a sustained basis,” said David Rosenberg, senior economist at Bank of Nova Scotia.