The Wilder View

Canada and the US are “B” students

score_table.PNGThe Conference Board of Canada released its 2008 economic rankings for 17 high-income countries. It uses a grading system based on percentiles across the following categories: inflation (A), GDP growth (B), income per capita (C), labor productivity growth (C), unemployment rate (C), employment growth (C), inward FDI (C), and outward FDI (C). The terms in parentheses are the “grades” received by Canada. Overall, Canada was ranked 11th, while the US took 8th place.

Although Canada’s ranking did not change over the year, the same cannot be said of other countries. Ireland fell from 1st to 17th, while Finland dropped from 6th to 15th.

One thing that I find rather interesting is that Canada gets an A for inflation and a C for productivity growth (the Conference Board grades inflation according to the Bank of Canada’s inflation target, 2%). It should be noted here that Canada has experienced perpetually weak productivity growth, not just in 2008. Longer term, strong productivity growth keeps the lid on inflation, while weak productivity growth allows inflation to edge upward. Going forward, the Bank of Canada will face headwinds in targeting inflation if productivity growth does not improve.

But you never know. The primary reason that Canada’s inflation rate was so relatively low in 2008 was due to strength in commodity prices in the first half of the year. The Canadian dollar appreciated, holding price pressures down.

The US grades are likewise interesting. It gets a D in employment growth, and an A (the only A in 2008 for this category) in labor productivity growth….hmm….correlation?

Originally published at News N Economics and reproduced here with the author’s permission.

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