Boom Minus Bloom

Was the bloom off Canada's durable boom? Although 6,000,000 Canadians, more than ever before, have jobs, and the gross national product seems sure this year to edge over 1956's record, some soft spots are appearing in an economy that is closely tied to the U.S. Cautioned the Bank of Nova Scotia: "The upward trend of Canadian business has in recent months been tapering off."

Industrial wages climbed higher month by month, but the cost of living edged up too. The Bureau of Statistics reported last week that prices in August set a new high for the fifth straight month--this one at 122.6 (1949 equals 100).

Ups & Downs. Canada's business and industry made a spotty picture. The big western oil industry throve; deliveries in June stood 13% above the 1956 rate. Capital investment this year should top 1956's record $7.9 billion by some 10%, and brisk retail sales proved that consumers still had money and were willing to spend it. But automobile production was down slightly for the year, and Chrysler of Canada announced that it would operate only one shift a day during the 1958 model year rather than two. Steel production was a little below last year's rate, and newsprint manufacturers last week announced plans to cut back. Reflecting a gloomier outlook for earnings and dividends, industrial stocks sagged.

To countless foreign investors, Canada still looked alluring, and "immigrant capital" helped drive the Canadian dollar in August to an alltime high of $1.0611 in terms of the U.S. dollar (it eased to $1.0498 last week). With their premium dollar Canadians bought more goods abroad than ever before, thus aggravating their chronic trade deficit.

Cross Purposes. Unsure of the economic future, the Bank of Canada and the federal government seemed to be working at cross purposes. The bank, striving mightily to control inflation by classical methods, put a squeeze on the money supply that drove the commercial banks' prime interest rate to 5 1/4% (v. 4 1/2% in New York). But the newly elected Tory government, worried about sagging housebuilding and rising unemployment, poured $150 million into new residential mortgage loans, hoped that the resulting construction would help keep unemployment next winter from exceeding the postwar high of 400,000 reached in March 1955. And the government, preparing for an election that may come as early as next spring, readied legislation to provide cash advances to farmers with unsold grain, higher pensions for veterans, widows, and the aged. These measures might help keep the economy bubbling, but would also contribute to the pressure on prices.

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