Monetary Policy Report – April 2002
At the time of last November’s Monetary Policy Report, two issues dominated the analysis: the global economic slowdown and the fallout from the September terrorist attacks. The Bank’s January 2002 Update described geopolitical developments as having evolved positively and consumer confidence as having improved. The most likely outlook projected for the Canadian economy in the Update was modest growth in the first half of the year, followed by a significant pickup in the pace of activity as the year progressed. The downside risk of sluggish growth persisting throughout 2002 was countered on the upside by the possibility of robust growth early in the year if confidence levels were restored quickly.
Recent information indicates that the recovery in the Canadian economy began sooner and has been considerably stronger than anticipated in January. With confidence returning quickly, stimulus from both monetary and fiscal policy has led to strong growth in consumption expenditures and new residential construction. Canadian exports have also been stronger than anticipated, as a result of greater-than-expected growth in the United States. The growth in final sales in the fourth quarter of last year was met largely out of inventories, a situation that is underpinning production in early 2002.