What’s behind Canada’s economic miracle? Housing
David Rosenberg

Looking back to last year, it would have been inconceivable to talk about a Canadian economic miracle; however, that is exactly what we have on our hands today.

Unlike the nascent U.S. rebound, the Canadian recovery has occurred with no arithmetic support from inventories, and with a lot less intervention in the form of fiscal stimulus. The National Bureau of Economic Research is still unsure of when (or whether) the recession ended south of the border, but Statistics Canada boldly told us a little more than a week ago that the domestic downturn was officially terminated back in the third quarter of last year.

So, what was the principal factor underpinning this impressive Canadian economic revival, especially in relation to what is happening in the United States? We can answer the question in one word: housing.

The housing sector is the quintessential leading indicator of the economy, and, true to form, it caught fire in Canada before the overall economy did. The U.S. market has stabilized, at best, with the help of massive doses of government support, but in Canada, housing activity has absolutely been ripping: Housing starts in March were up 38 per cent on a year-over-year basis and up a resounding 75 per cent from the trough of February, 2009; existing home sales are up more than 60 per cent from the bottom in December, 2008.

Real estate-sensitive retail sales have risen nearly 15 per cent year over year as of February, the fastest pace in seven years.