So, as business leaders and policy-makers, together, we have our work cut out for us. Still, to do our job, the Bank of Canada needs to understand how these factors affect investment decisions. A vibrant business sector, after all, is essential to a healthy labour market and to our economic prospects. The outlook for investment was only one of many factors that went into our interest rate announcement yesterday.
As I said, there have been some encouraging signs that investment outside the energy sector has firmed up. Let me take you through the other main points of our discussion. Naturally, Governing Council spent time talking about whether the economy was progressing as we had forecast in our April MPR.
As a reminder, we projected that the economy would expand at an annual pace of just 0. We also projected growth would rebound modestly to a 1. Evidence has been accumulating that tells us our story is on track. We hope to see this confirmed in the national accounts data that Statistics Canada will release tomorrow. The labour market has been strong, with solid growth in jobs and steady growth in wages. It turns out that this gap can be explained in large part by the behaviour of companies in the construction and oil and gas sectors, which have been key drivers of the recent GDP slowdown.
Companies in these sectors have been generally keeping their employment levels fairly steady, while reducing the hours their employees work. This is consistent with firms believing that the economy has been going through a temporary soft patch, exacerbated by the brutal winter experienced in so many parts of Canada. To the extent that this buildup is unplanned, it may dampen production in some sectors later this year.
On top of this, there has been flooding in Eastern Canada and Manitoba and terrible wildfires here in Alberta, which reminds us that Mother Nature can be ruthless. These events are causing severe hardship to many communities. And they may add some choppiness to economic data.
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Back in April, Governing Council said we would watch developments in three key areas: household spending, oil markets and global trade policy. Much of our latest discussions centred on these areas. In terms of household spending, we have seen strong growth in labour income, which is supporting consumption.
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Consumer confidence has firmed, and retail sales have picked up. Of course, the housing market has been a concern in many areas of the country, including Alberta. Recent data on starts and resales make us more confident that housing markets in many places are falling more in line with fundamentals. Here in Alberta, ongoing weakness in housing can be explained by adjustment over the past five years to continuing challenges in the energy sector.
The greater Vancouver market, which had been quite frothy, is still adjusting. This follows changes in mortgage financing rules, past increases in interest rates, and the provincial and municipal measures aimed at discouraging speculation and foreign buyers. Weather likely affected the Toronto area in recent months, and, while we need to see more data, that market is showing signs of stabilizing. At the same time, we know that curtailments and transportation constraints continue to weigh on production. These should ease over time as rail capacity expands later this year and as Line 3 is completed.
This will bring a welcome boost to the Canadian economy. We will continue to watch this closely. This brings me to trade and the ongoing conflicts. There have been some positives lately. The US government has dropped its tariffs on steel and aluminum, and Canada has dropped its retaliatory measures.
Other developments are discouraging. China and the United States have escalated their dispute, and Canada has been caught in the crossfire. Further, China has imposed new restrictions that are affecting some Canadian farmers directly. On top of this, we see the potential for more friction between the United States and European Union. Of course, the trade disputes are not just a short-term concern. There are also longer-term implications for the global and Canadian economies.
If some of these disputes were to be resolved, that would provide a welcome boost to the Canadian and global economies. But if the disputes were to worsen and become long lasting, the outlook would be quite different. Not only would we see weaker economic demand, but the supply side of the economy would also take a hit as companies deal with disruptions to their supply chains.
Obviously, this remains a major preoccupation for us. Governing Council also spent some time talking about prices in financial markets. Since the start of the year, financial conditions have become more accommodative in many economies, and this will help support economic growth. We talked about the signals that we should take from a very flat or, in some cases, inverted yield curve. These developments partly reflect a change in tone by many central banks and, possibly, investor appetite for long-term, fixed-income assets.
They nonetheless also reflect a concern about the prospects for growth that is not reflected across other asset classes. We continue to be attentive to these signals. On that front, inflation remains near 2 per cent. Some temporary factors are boosting inflation and offsetting the modest downward pressure that is being generated by excess supply in the economy. It indicates an increase in the per capita income of every citizen.
The standard of living includes various things like safe drinking water, improve sanitation systems, medical facilities, the spread of primary education to improve literacy rate, eradication of poverty, balanced transport networks, increase in employment opportunities etc. Quality of living standard is the major indicator of economic development. Therefore, an increase in economic development is more necessary for an economy to achieve the status of a Developed Nation. Below is the top 7 difference between Economic Growth and Economic Development.
- Difference Between Economic Growth vs Economic Development.
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Scope Economic Development is considered as a Multidimensional phenomenon because it focuses on the income of the people and on the improvement of the living standards of the people of the country. Economic Growth is considered as a single dimensional in nature as it only focuses on the income of the people of the country.
Quantitative Terms:. Related To Economic Development is related to Underdeveloped and developing countries of the world. Economic Growth is related to developed countries of the world. Effect Qualitative and Quantitative Impact on the economy. Improvement in life expectancy rate, infant, literacy rate, poverty rates, and mortality rate. Brings a quantitative impact on the economy. Increase in the indicators like per capita income and GDP, etc. Do high levels of GDP necessarily correspond with high levels of development? Not necessarily. Countries like China and India have much higher levels of GDP than, say, Singapore, New Zealand or Belgium, but few would suggest that the latter are economically less developed than the former.
Assuming that it does, is it reasonable to say that development is taking place?
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Certainly, statistics reveal that the most developed countries are those with the highest GDP per capita. Clearly, though, GDP per capita doesn't tell the whole story. It says nothing about how incomes are distributed or spent. Growth in GDP per capita could result from growth in the incomes of richer groups in society, with incomes of poorer groups remaining largely unchanged. It coincides with spending patterns that are skewed towards the rich and which exclude the needs of the poor.
It doesn't necessarily follow that growth in per capita GDP will lead to a reduction in poverty or to broader social and economic development. Indeed, there are those who argue, rightly or wrongly, that in many countries economic growth is associated with increasing levels of poverty, rather than the reverse.
The relationship between economic growth and poverty is a hotly debated topic, about which people are very divided. Some people highlight the negative effect of growth on low income groups, stressing the need for new approaches to economic development that will allow the poor to benefit more from economic growth than they do at present. Others are more sanguine, believing that the benefits of current models for growth will eventually ' trickle down ' to poorer groups in society, if they are not already doing so.
Most development professionals now believe that growth, at least in poorer countries, is essential but not always sufficient for poverty reduction in the longer term.
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However, inequality is a potentially important factor in determining how quickly and effectively growth reduces poverty, with growth in countries that start out with high levels of inequality being less effective in reducing poverty than it would be were inequality less pronounced see Ravallion A renewed interest in the role of inequality and efforts to reduce it appears to have entered the development discourse since the global economic crisis of the late s.
Much of the debate in this area revolves around the values and ideals of those engaged in it, as well as the different theories on the subject. It also hinges upon interpretations of the empirical evidence. Poverty and income distribution are hard to measure, especially in developing countries where the capacity to gather and analyse data is often very weak. Consequently, the strength of the statistical relationship between growth, poverty and inequality remains the subject of heated debate.
There is also controversy about the mechanisms by which economic growth may reduce poverty, the timing of these and the policy implications. This has been heightened by the ' bottom billion ' debate see 1. The bottom billion debate which revolves around the question of whether the poorest people the bottom billion are to be found in the poorest countries see Collier or in fast growing middle income countries see Sumner The policy implications and the politics of tackling poverty depend greatly on which perspective is taken in this debate.
Should, for example, international efforts to reduce poverty be focused on the poorest countries much of sub-Saharan Africa plus various failed states or on reducing poverty in more densely populated parts of the world especially South Asia, but elsewhere too where most of the world's poor now live, but where average incomes in the countries they live in are much higher than in low income countries? Some would argue that the poor in middle income countries should be the responsibility of the national government concerned and international efforts should be concentrated instead on countries where governments have far fewer resources at their disposal.
Others argue that this is to neglect the plight of the majority of the world's poor people.
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