USD to CAD : Canada's GDP
Let's take a look at the GDP of Canada, and see how the figures
affect the
relationship of the usd to cad currency
pair, and in particular whether we can forecast any future trends from
the data. The Gross Domestic Product is one of those indicators that we
often hear mentioned, but never really understand what it means ( unless
you happen to be an economist, and I'm not sure most of them understand
it anyway!) In short GDP is supposed to provide a guide to the value of
all goods and services produced in the period within Canada ’s borders,
measured at market prices, and as finished goods. In other words a
constituent of a product is not measured twice, so the wheat to make
bread would not be included, only the bread itself. Is GDP significant? -
the simple answer is yes, but only because there is nothing better with
which to gauge how the various wealth creating sectors of the economy
are performing. It is a crude measure at best, but better than nothing,
and since all other major economies use roughly the same measure, at
least it provides some sort of basis for comparison. The alternative is
GNP which I will touch on briefly.
USD to CAD : GDP January 2008
One
of the unusual things about the Canadian GDP figures ( which is unlike
many other countries ) is that the GDP data is released by the
Canada's
National Statistics Agency on a monthly basis ( not quarterly unlike
many others ). The month reporting is generally around two months
behind, so the results for the month of January will be reported at the
end of March, and those for February at the end of April etc. In many
ways this gives a more timely indication of the current situation with
figures being only two months old before the release. In addition, with
the increase in the frequency of data, it is possible to make more
meaningful comparisons on a month by month basis. Now in order to make
the point and perhaps provide some guidance on how I read the figures, I
have reproduced two 'summary' charts from recent GDP monthly releases as
shown below in order to highlight two important issues. So let's take a
look at the first set of data and I must stress that these are very
simple overviews of the data provided - you can spend hours and days
analysing it, as I'm sure many economists do ( whether they are any the
wiser afterwards is anyone's guess!!) As we can see we have a simple bar
chart above, which shows the main industrial sectors and from the
vertical baseline of zero, whether the sector has shown an increase or
decrease. The figures here look relatively healthy, with strong growth
in the manufacturing ( we don't know from this which specific areas of
manufacturing ) and wholesaling markets with small increases in the
other sectors. Those showing a decline are agriculture and forestry, and
utilities. Clearly what this simple bar chart does not tell us is
whether these results are good, bad or indifferent. Nor do they tell us
whether there is any seasonal effect that we need to consider, and
finally the chart gives us very little detail on the breakdown within
each sector.
USD to CAD : GDP November 2007
So in order to reach some meaningful conclusions we need to
compare these results with an earlier data set in order to provide a
comparison. So let's look at the figures from 2 months earlier in
November. Now as we can see from the bar chart, there are some key
differences from the first. The most dramatic is in wholesaling which in
November is showing a decline, and yet two months later the sector shows
strong growth. Now this could be a seasonal variation with wholesalers
supplying goods for the Christmas retail market, combined with companies
spending budgets before the expiry at calendar year end. The retail
sector has shown a reversal from negative to positive, again probably
helped by the seasonal effect and high street sales. The same reversal
is also seen in the mines and petroleum sector from negative to
positive. Manufacturing has remained strong throughout the period. The
above charts are kindly provide by the National Statistics Agency of
Canada.
Now the above is a very simple analysis of Canada's GDP, month on month, but I hope it demonstrates the point that you do not have to be an economist to draw some relevant conclusions of your own. Naturally how these figures affect the usd to cad currency rates will depend on several other factors. Firstly, you would need to consider these figures year on year to see how they compare. Secondly you would need to dig a little deeper into each sector, which is not difficult, as the NSA provide a raft of useful and detailed information on their site. Finally the degree of volatility and how the figures are viewed will depend on how close they are to the analysts' expectations. As the data is reported monthly there is often less opportunity for wild variations or for unexpected lows and highs - however they do happen.
USD to CAD : GNP
How does GNP differ from GDP? - in simple terms GDP is the goods and services produced within the country by both Canadian and non-Canadian companies, hence the word "domestic". GNP on the other hand is a more 'national' measure as this includes goods and services produced by Canadian companies in other countries. The GNP is calculated in such a way that it is also equal to total spending on Canadians’ goods and services. In other words, total income must equal total spending when the sums are done for the country as a whole. Thus, GNP is the sum of spending by consumers on food, clothing, rent, durable goods, personal services and other items, plus government expenditures on goods and services, plus business outlays on capital equipment and new factories and commercial buildings, plus the spending of foreigners when they buy exports of Canadians. Imported goods and services are deducted in the calculation because they are not produced by Canadians.
Finally always remember with the Canadian economy that it is dependant ( for better or worse ) on it's nearest next door neighbour which will always be one of the principle driving forces behind a good, or not so good, set of GDP data. Having looked at Canada's GDP figures and some simple analysis let's take a look at CPI and how this affects the usd to cad currency pair.