In Brazil, the authorities have taken major steps to address their difficulties. Overall, global financial markets now seem better able to assess risk. Interest rate cuts by central banks in all major countries have helped restore investor confidence. Most importantly for Canada, the U.S. economy has continued to outperform expectations with strong growth and, as yet, no definitive sign of inflation pressure. Nonetheless, there is still a fair degree of uncertainty about the overall external environment, given the divergent performance of the major economies.
Japan is still in recession and Europe has been slowing down.
Because of this, we are expecting only a slow recovery in world commodity prices this year. In Canada, the recent driving force in our economy has been exports. The strong demand in the U.S. economy, the relatively weak Canadian dollar and increasingly competitive Canadian manufacturers are allowing us to sell into the United States very successfully. What we are expecting to see now, however, is an increase here at home in consumer and business spending. We believe that the improvement in business and consumer confidence that we have seen in the last few months, the better employment picture and recent reductions in interest rates will all help support domestic spending.