Oct 29 (Reuters) - Canadian exports of noncommodity goodshave failed to recover as expected due to an atypical U.S.recovery and the loss of companies in the recession, with astronger Canadian dollar adding to the problem, Bank of Canadaofficials said on Tuesday.
"The biggest reason exports have been weak is that the U.S.economy, our major export market, has had the deepest recessionand the slowest recovery since the Great Depression. So that byitself sets a weak track for an export recovery," Tiff Macklem,senior deputy governor at the central bank, said in anappearance before lawmakers alongside Governor Stephen Poloz.
The Bank of Canada held its key overnight rate unchanged at1.0 percent last week, but surprised markets by signaling itsnext move could just as well be a rate cut as a hike,effectively ending the mildly hawkish stance it had held for ayear and a half.
Macklem said the strength of the Canadian dollar versus theU.S. dollar is only part of the reason for the lagging exports.
"There are competitiveness factors, the (Canadian) dollar ispart of that. We estimate it's about two-thirds of that andone-third is the weak productivity performance we've had overthe last decade," he said.
The bank has repeatedly expressed disappointment thatexports - a central plank of the Canadian economy - have notbounced back as quickly as the bank's models had predicted.
Asked to explain its faulty forecasts, Poloz said the reasonis that the U.S. recovery is taking much longer than anyrecovery from past crises, and he emphasized that many Canadiancompanies simply vanished in the 2008-09 recession.
Now, he said, that trend is starting to reverse itself.
"The good news is we've seen a sudden increase in thepopulation of companies in 2013, which is very encouraging,"Poloz said.
"It's the first evidence that we've seen since 2008 of whatI would call natural growth, which is the growth process that isself-generating, self-sustaining, and I do believe that thatwill bring more balance to the labor market performance as we gothrough the next couple of years."
- Budget, Tax & Economy
- Bank of Canada