Oh-Oh Canada? Economy Shows Signs Of Going Soft

By John S. McClenahen As the U.S. economy has rapidly slowed down, Canada's economy has remained remarkably resilient. But that may be about to change, warns Salomon Smith Barney Inc., a unit of Citigroup Inc., New York. Indeed, Canada's Survey of Business Conditions in Manufacturing for January "was so weak that we can no longer rule out a negative print on quarterly GDP in the first or second quarter," relates the securities firm. Firms appear to be cutting back production to help control rising inventories and adjust to falling demand. The Canadian business conditions survey, notes Salomon Smith Barney, "has less of a track record" of signaling broad economic trends in Canada than does the closely-watched National Assn. of Purchasing Management's manufacturing index in the U.S. "However, historical evidence suggests that production declines of the magnitude signaled by the [Canadian] survey [in January] eventually spread well beyond the manufacturing sector."

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