BUSINESS
06/01/2011 12:03 EDT | Updated 08/01/2011 05:12 EDT

Canadian Economy Gains Less From Boom: CIBC

CBC -- The global boom in commodity prices might not be helping Canada's economy as much as in past decades, according to a new report released Wednesday.

CIBC Economics said that is because the increased demand for rocks and oil is coming from newly-developing countries, such as India and China, places with fewer ties to the Canadian economy.

"Looked at from 30,000 feet, the improvement in the terms of trade has been a stunning win for Canada, but real trade volumes have not, in fact, been that impressive in the past decade's run for resources," said economists Avery Shenfeld and Emanuella Enenajor in a report on the commodity boom.

In recent years, a number of tradable commodities, such as oil, copper and food stuffs, have risen substantially. One reason is because of the economic recovery in western industrialized countries. In addition, the growing middle classes in newly-developing nations are buying more products, which in turn has pushed up the demand for primary commodities from countries like Canada.

But, Canada essentially sells fewer higher priced commodities to these countries compared to the values of more expensive imports Canadians purchase from foreigners, Shenfeld and Enenajor said.

Dollar gain

Worse still, the perception that Canada benefits from the commodity boom has boosted the valuation of the Canadian dollar. The higher price loonie, however, pushes up the cost of all Canadian exports, hurting foreign sales, especially of finished goods, the CIBC said.

Thus, while certain sectors of Canada's industrial base might gain from rising global prices for everything from gold to wheat to corn, whether the overall economy benefits is a murkier question, the economists said.

"We're blessed by our resource base, but when it comes to commodity price rallies, it's not clear that the more the merrier holds true for Canada these days," Shenfeld and Enenajor said.