MONTREAL — IN Canada, exports are up, unemployment is down, and inflation is low. That sounds like a boom. But for consumers, the country's economy is still pretty much a bust.
The reason, say economists, is uncertainty and debt; uncertainty over whether jobs will last and whether interest rates will stay low.
The jobless rate dipped to 10.8 percent in February. "It's the seventh straight month of job growth," says George Vasic, chief economist at DRI Canada in Toronto. He expects 3 percent growth in gross domestic product this year.
Industrial Ontario, hit hard in the recession, is bouncing back. Unemployment in the city of Toronto (responsible for 15 percent of all the economic activity in Canada) fell from 11.7 percent in January to 10.5 percent last month. Ontario gained 76,000 new jobs in the last year, with more than half coming from the manufacturing sector, according to Statistics Canada (a federal government agency).
The agency's "help wanted" index is also up. The outlook for job hunters improved in February by 5 percent.
Canadian wages and salaries are up, but only slightly. Though department store sales rose 3.4 percent in January, economists are not impressed. They say consumers really have not started spending yet.
Overall, exports were up 18.4 percent in February over January. Exports of automotive products have risen 40 percent over levels of a year ago. Telecommunications and office equipment is up 25 percent.
"There's broad strength in exports, especially to the United States," Mr. Vasic says, "based in things such as energy, wheat, and lumber, as well as transportation equipment (from automobiles to subway cars).... The problem is with domestic demand."
Canadians are nervous about jobs. Low interest rates have failed to help for two reasons. One is that exchange rates are so unpredictable people don't want to make loan commitments.
"The wild gyrations in the value of the Canadian dollar affect interest rates," Vasic says. "Last year there were three such spikes in rates." The other reason is that Canadians already have plenty of debt.
"Consumer debt is the highest we've ever seen," says Dominique Vachon, senior economic adviser to the National Bank in Montreal, Canada's sixth-largest bank. Ms. Vachon estimates that Canadian consumer debt equals 75 percent of earnings; for every dollar Canadians earn, they owe 75 cents.
"Because of the debt load, consumer spending will be slow," Vachon says. She has a unique way of gauging the economy. She counts the number of expensive imported cars in the parking lots of discount stores such as the Price Club.
"People are looking for bargains everywhere, and it isn't just the low wage earners," Vachon says. "Just look at the Mercedes in the parking lots."
Both Vachon and Vasic expect it will be a year before individual Canadians start spending again. Until then the growth will come from the exports.
"The economy is on two rails," Vasic says, "but the domestic side has yet to get going."
Economists say growth in Canada will be uneven, with prosperity in the west and high unemployment in the east. In the middle, Ontario is recovering. In Newfoundland, Canada's poorest province, unemployment was up 0.6 percent to 20.1 percent. Yet "Alberta and British Columbia will continue to be strong," Vasic says.