. that's low by historical standards, but still well above zero. in some of these economies, as i've mentioned, the prices of goods are actually falling. but much of that drop has come about as a result of higher productivity. productivity growth has been more concentrated in goods - producing industries. that is why we see sharp divergences in goods and services prices. in the united states, for example, over the past year, goods prices — based on the core measure of inflation — fell 1½ per cent, while services prices rose by about 3½ per cent, resulting in an overall core inflation rate of about 2 per cent. a similar scenario is playing out in the united kingdom. if technological advances and productivity growth cause lower goods prices, profitability in the goods - producing industries will be preserved, wages and salaries can increase, and there will be no adverse effects on total employment and spending. in canada, goods prices are rising more slowly than services prices. however, we're not seeing actual declines in the overall price of goods. although this may have something to do with structural differences in our economy, fundamentally it reflects the fact that domestic demand in canada is stronger than in the united states, and our economy is operating closer to capacity. here is some of the evidence we have to date to support this view. capacity utilization among canadian goods producers is getting close to the point where production constraints start to emerge. in some sectors, businesses are reporting shortages of skilled labour. and profit margins for consumer - related industries trended up through the first three quarters of 2002. all of this suggests that most goods prices in canada are not being discounted because of weak demand, as appears to be the case in the united states. moreover, canadian corporate balance sheets are improving and are, indeed, in relatively good shape compared with those in other countries. symmetrical monetary policy minimizes the risk so, those are both sides of the price picture. i've laid out for you some of the factors that are moving prices at home and abroad. now, i'd like to spend some time explaining how canada's monetary policy framework reduces the risk of both persistent inflation and persistent deflation. as i said before, canadian monetary policy acts in a symmetrical manner — that is to say, we pay equal attention to any significant movement in inflation, whether above or below the 2 per cent target. we respond to shocks that would push inflation trends away from that target. for example, following

the second dimension is monetary policy. we have cut interest rates by 150 basis points since the shock began. we know this will not stimulate economic growth right now while the stores are closed. but it will lay the foundation for the subsequent recovery in the economy once containment measures are lifted. clearly, well - functioning markets are a necessary condition for successful monetary policy. four times per year we publish a monetary policy report with our updated forecasts for the economy. as we approached our april 15 announcement date, we decided not to offer precise numerical forecasts — a controversial decision. in the circumstances, we felt it would amount to false precision. of course, there was no shortage of forecast numbers out there. the situation seemed to be devolving into a contest for who was gutsy enough to forecast the biggest decline in economic activity. as the central bank, we don ’ t play that game. we heard phrases like “ bigger recession than the global financial crisis, ” “ biggest recession since world war ii ” and “ biggest recession since the great depression. ” such comparisons are unhelpful, for they use arithmetic to compare various events that had very different effects on people. a recession is a dynamic phenomenon : demand declines, firms lay off workers, confidence declines, people demand even less, more firms lay off workers ; in other words, it is a negative dynamic that takes time and healing to reverse. a depression is worse ; it is deeper and longer and happens because deflation interacts with debt to create widespread defaults. neither recessions nor depressions lend themselves to a simple numerical standard. at this point, there is no reason to assume that any of these behavioural dynamics will emerge from the current episode. at the core of the policy response to the covid - 19 shock is a truly historic expansion of fiscal support. we believe these measures will put a floor under the economy as well as business and consumer confidence. in particular, the measures are designed to be elastic — to expand or contract depending on the scale of the ultimate shock to the economy. this makes it even harder to make a point forecast for economic activity because, to do so, you must analyze both the shock and the fiscal response and how they interact. you also need to distinguish between the economy ’ s output and its income. another positive attribute of the fiscal response is that the wage subsidy helps maintain the connection between employees and their employers. that will make for a rapid rebound in activity once containment measures are removed. this is