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Canada's economy is more 'fragile' than the U.S



As global economic landscapes continue to evolve, concerns are emerging about the fragility of Canada's economy, especially when compared to the robust growth seen in the United States. According to David Rosenberg, the founder and president of Rosenberg Research, the Canadian economy is facing challenges that may not be immediately apparent, contrasting sharply with the U.S. economy's resilience fueled by fiscal stimulus.


Rosenberg emphasizes that Canada's economic strength is, to some extent, masked by unprecedented immigration and population growth. While this has created an illusion of robust performance, Rosenberg argues that when evaluating real per capita income and output, Canada is already in a recessionary state.


One key distinction between the two neighboring economies lies in the significant fiscal stimulus that the United States has enjoyed. This boost is attributed to the Chips Act, enacted in 2022, aiming to enhance semiconductor manufacturing, research, and development. Rosenberg contends that much of the U.S. economic growth in the past year is a direct result of this monumental fiscal stimulus, with the country's Gross Domestic Product (GDP) expanding by 2.5% in 2023.


However, the contrast between the Canadian and U.S. economies is not merely about fiscal measures. Rosenberg highlights the structural differences in their economic frameworks. The U.S. boasts a large and relatively closed economy, allowing it to weather international storms more effectively. In contrast, Canada's economy is smaller and more open, making it susceptible to external shocks.


One critical aspect contributing to Canada's vulnerability, as outlined by Rosenberg, is its sensitivity to global events. He notes that Canada is three times more responsive to the global economy than the United States. International occurrences, such as economic slowdowns in the European Union and deflation in the Chinese economy, can significantly impact Canada's economic trajectory.


The ripple effect of these global factors is particularly pronounced due to the smaller scale of Canada's economy. With a more open economic system, the nation becomes inherently more influenced by external events. Rosenberg points to economic data from the European Union showing signs of flattening and concerns about deflation in China as factors that could have a substantial impact on Canada's economic health.


In conclusion, while Canada may appear to be holding its own on the surface, a deeper analysis suggests that its economy is more fragile than meets the eye. The U.S. benefits from substantial fiscal stimulus, shielding it from some of the challenges faced by its northern neighbor. As Canada navigates its economic landscape, understanding and addressing these vulnerabilities will be crucial for fostering resilience and sustainable growth in the face of global uncertainties.


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