After struggling to achieve takeoff last summer, it turns out that Canada’s economy blasted ahead in the fourth quarter at a pace that defied all expectations.
Its five-per-cent annualized growth rate was the strongest in nine years, said Statistics Canada Monday.

This surge of growth, which eclipsed the 3.3 per cent advance expected by the Bank of Canada, was “astonishing,” said Yanick Desnoyers and Marco Lettieri, economists at the National Bank.

You might call it a good news/good news joke.

First, there was the good news analysts expected; a rebound in our depressed exports  helped by the revival of Canada’s auto industry from its near-death experience earlier in the year  allowed trade to contribute to growth instead of subtracting from it.

But there was more. The other good news  the news that blew way past expectations  was an explosion in home construction and renovation, noted Peter Buchanan, an economist with CIBC World Markets.

Stimulated both by a recovery in housing demand and by government tax breaks for home renovations, residential investment shot up at a 30 per cent pace, its biggest jump in 24 years.

In fact, practically everything was moving in the right direction during the quarter, pushing a key measure of economic health, final domestic demand, ahead at a vigorous 4.6 per cent rate, faster than in any other G7 nation.

That makes Canada’s recovery less fragile than in most other rich nations, said Capital Economics, a British consulting firm.

Final domestic demand attempts to measure a country’s own homegrown economic growth, excluding the effect of trade and inventory adjustments  which can be volatile enough to distort the figures at times like this.

For example, U.S. growth in the fourth quarter appeared to be even stronger than Canada’s, at 5.9 per cent, until you noticed that inventories accounted for about half of this growth.

Inventories  all the stuff that companies keep on the shelf and in the warehouse  tend to expand when times are improving, but to be cut back sharply when times are tough.

During the deep recession last year, many firms laid off workers and cut production of goods to an absolute minimum, conserving cash by running down inventories instead. Retailers also tried to keep stocks lean.

Such a deep cycle of inventory cutting slashed economic growth sharply for most of last year.

But when the cutting slows and eventually reverses, there’s an mirror-image surge in growth until levels of inventory return to normal.

It was the beginning of this inventory boost  which is nice, but only temporary  that was such a big factor in U.S. growth in the fourth quarter.

In Canada, though, inventory cutting continued apace in the same period, leaving more solid, demand-driven activity accounting for this country’s rebound in growth. Our inventory boost might be beginning about now.

Before we get too euphoric, however, it’s important to note that most analysts think Canada’s growth rate must slow later in the year. First, the housing market is clearly overheated and will cool as interest rates rise  something that could begin as soon as July after this strong growth report.

Second, a slowing of rapid U.S. growth will exert a drag on further export gains.

Still, Canada’s growth could settle down to a still-healthy rate around three per cent to 3.5 per cent, predicts economist Diana Petramala at the Toronto-Dominion Bank.

And the boost in the fourth quarter seems likely to persist into the first quarter, which ends this month. Economic growth in December was significantly stronger than expected, which boosted the starting point from which growth began in this quarter.

Already, we’ve seen the benefit of strong fourth-quarter growth in the job market, which added about 90,000 positions during the period. That strength persisted in January, which saw the creation of another 43,000 jobs.

As a result, Petramala, who had expected to see the unemployment rate remain around 8.3 per cent as discouraged workers returned to the job market, offsetting the employment gains, now thinks job growth could be strong enough to let unemployment edge as low as 8.1 per cent in the next month or two.

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Canadians have long tended to define themselves by what they are not: Americans. As Finance Minister Jim Flaherty prepares to deal with the fiscal cost of the recession, that distinction is taking on new meaning.

Facing the biggest budget deficit since the Second World War and none of the spirit of political compromise necessary to fix it, prospects for the United States. Fiscal reality limits the Obama administration’s options, and it remains uncertain whether the economy is strong enough to reverse an unemployment rate of about 10 per cent without government spending.

As a general rule, what’s bad for the United States is worse for Canada. Exports account for about a third of Canada’s gross domestic product and more than 70 per cent of those shipments are destined for buyers in the country’s southern neighbour. In 1982, the U.S. economy contracted 1.9 per cent, compared with a 2.9-per-cent slump in Canada, according to the International Monetary Fund; in 1991, U.S. gross domestic product dropped 0.2 per cent, compared with a decline of 2.1 per cent in Canada.

But Canada appears destined to do better during this period of American economic woe, which has come to be typified by that stubbornly high unemployment rate and a budget deficit that is 10.6 per cent of gross domestic product, the highest since the U.S. faced the bill for its participation in the Second World War.

The biggest reason is that Canada’s finances are so much stronger. The federal deficit, while a record in nominal terms, is about 4 per cent of GDP. The difference with the U.S. and other industrial countries has captured the attention of international investors, who bought a record amount of Canadian bonds in 2009.

Demand of that kind is lowering federal and provincial governments’ borrowing costs, suggesting Canadian taxpayers won’t be facing the degree of tax increases or spending cuts coming the way of their American cousins. That leaves Canada in a better position to take advantage of the rebound in the global economy: While the U.S. and other countries will be paying off their debts, Canada will be relatively free to take advantage of the upturn.

“That’s a competitive advantage right off the bat,” said Peter Hall, chief economist at Ottawa-based Export Development Canada, the country’s export credit agency. “On a relative basis, Canadians will be better off.”

To understand Canada’s competitive advantage, consider the gap between yields on Canadian and U.S. 30-year bonds. The difference, or spread, is currently about 50 basis points, or half a percentage point, in Canada’s favour. The average spread since 2000 is seven basis points, according to Mark Chandler, a fixed-income strategist at RBC Dominion Securities Inc. in Toronto. The current spread shows investors are willing to forgo yield for the security of lending money they can be certain will be repaid, something that will make Finance Minister Jim Flaherty’s job far easier because he will be able to save billions in interest payments.

“Canada, from a safe-haven perspective, looks good,” Mr. Chandler said.

U.S. President Barack Obama’s deficit could also help Canadian companies in a more immediate way. Only 36 per cent of the President’s original $787-billion (U.S.) stimulus plan has been spent. That means more than $500-billion from that program will be injected into the American economy over the next couple of years, a jolt that should help Canadian exporters.

There’s also potential for an additional $100-billion in stimulus spending, which Mr. Obama pledged in his budget last month. That money has an even greater chance of reaching Canadian companies because differences over the Buy American provisions that were attached to the original stimulus program have been ironed out.

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In four months, Steve Bovair’s downtown neighbourhood will be transformed from cosmopolitan high life to a barricaded no-man’s land.

On a normal day, the network engineer can look outside his 17th-floor window to find a typical urban scene. Cars drift through his intersection at Lower Simcoe St. and Bremner Blvd. Customers dash into take-out restaurants and convenience stores at the base of his building. Construction workers pound away at the beginnings of a new condo tower across the road.

But on June 26, the scene outside his window will resemble an urban combat zone: razor-wire fences lining the streets, helicopters clattering overhead and  potentially, at least  throngs of screaming protestors confronting police officers in riot gear. Bovair lives kitty-corner from the Metro Toronto Convention Centre, picked as the site for the upcoming G20 summit, and for two days in June, a swirling mob of foreign delegates, journalists, security personnel and  potentially, at least  stick-wielding protestors will take over downtown Toronto, literally landing on his doorstep.

Needless to say, Bovair won’t be sticking around.

“We’ve actually made the decision to go away that weekend,” said Bovair, who plans to escape with his wife to their summer home near Collingwood. “The easiest thing is to go away … and then come back when all the commotion’s over.”

Protests and fears of terrorism have become part and parcel of high-profile international meetings like the G20 summit, and Ottawa is funding an RCMP-led task force called the Integrated Security Unit to oversee security for the G20 and the G8 summit, which will take place in Huntsville. Collectively, the two meetings have been pegged the biggest security event to occur on Canadian soil.

“With the G8 and G20 held on the same weekend; it’s never happened before anywhere globally,” said Michele Paradis, RCMP spokesperson for the ISU, which also includes the Canadian Forces and officers from Toronto, Peel and the OPP.

Security officials have assured Torontonians the convention centre will create a smaller “security footprint” than bigger and more isolated venues like Exhibition Place, which was floated as a possible location. But even though the ISU says it will strive to maintain a “business as usual” atmosphere for downtown Torontonians, barricades are likely to be necessary and several security zones will be established around the downtown core.

Security perimeters are still being mapped out, but the Waterfront Business Improvement Area says police have told them zones could stretch as far north as Queen St. and as far east and west as Yonge St. and Spadina Ave.

Councillor Adam Vaughan, whose ward contains the G20 site, says he wouldn’t be surprised to see the security blanket reach as far south as the Gardiner Expressway.

“The space between Bremner (Blvd.) and the Gardiner … my sense is they’ll be securing all of that,” Vaughan said, adding he anticipates the club district will also face restrictions during the G20 summit.

Security officials promise to communicate details as soon as possible, but many residents and business owners are anxious for information.

“We would like to know as soon as possible so we can make plans,” said Elizabeth, owner of Chunky Fries, a food truck that parks in front of the convention centre. She declined to give her last name.

“We don’t really know (anything) yet. The city hasn’t notified us,” she said. “I anticipate we’ll be asked to move for security reasons.”

But when Pittsburgh hosted the G20 last year, the U.S. Secret Service didn’t announce its security boundaries until two weeks prior to the summit. Two visible security perimeters were ultimately constructed around Pittsburgh’s conference site, which is in the city’s central business district and backs onto the Allegheny River.

In Pittsburgh, the immediate area around the conference site was transformed into a pedestrian-only zone, accessible via two checkpoints, and an outer zone was blocked off to cars. Residents living within the perimeter had to undergo background checks, show ID and pass through metal detectors.

The blocked-off perimeter ultimately spanned an area measuring just over three-quarters of a kilometre by one-quarter of a kilometre; extrapolating to Toronto, this could mean a boundary area that stretches from Spadina Ave. to York St., and from the Gardiner Expressway to Wellington or King Sts.

But in Toronto, G20 organizers will also have to contend with a much more dynamic and complex neighbourhood than Pittsburgh. Complications seemingly loom in every direction:

• To the west is the Rogers Centre, which may fill with more than 40,000 fans if former Blue Jay Roy Halladay comes back to Toronto to pitch against his old team for the first time. Paradis says it’s up to the team whether they will reschedule; Blue Jays spokesperson Mal Romanin says he still has to confer with G20 officials but for now, the game is “full steam ahead.”

• To the east is Union Station, that frenetic transportation hub that funnels thousands of travelers every day to their TTC, GO Transit and VIA Rail destinations. The ISU isn’t planning to shut down the station or cancel routes at this point.

• Overhead, planes fly to and from the island airport. The ISU says they have no plans yet to shut down the airport, although Toronto Port Authority officials say general aviation will probably be “severely restricted.”

• Underneath lies one branch of the PATH system, a web of interconnected corridors that links more than 50 buildings and office towers. The ISU says the PATH probably will face “restrictions.”

And just south of the convention centre are the former railway lands, now one of the fastest-growing residential areas in the city. In Pittsburgh, the ward that included the conference site had only about 2,700 residents during the last census, in 2000; in Toronto, the railway lands alone contain some 8,000 residential units, according to Vaughan.

“The federal government appears to have paid absolutely no concern to the concerns of the community,” said area resident Mike Brock, who lives a few blocks from the convention centre. “I have a 14-month-old daughter. You worry about having to leave and go through crowds and tear gas being thrown. … It just seems like it was a very poorly thought-out location.”

Business owner Rosa De Silva fears her clients won’t be able to access her hair salon at Wellington and John Sts. if she falls within the security perimeter. And if she finds herself at the edge of the barricades, she worries her storefront could become collateral damage in the crossfire of police and protesters.

“If that kind of thing happens, who’s going to pay?” she asks. “The government has to help.”

For business owners in Pittsburgh, violence wasn’t a problem, but many shuttered for the G20 summit. The ones that stayed open saw their bottom line take a giant hit.

“It was extremely painful,” recalls Pittsburgh restaurateur Robin Fernandez, who owns a tapas restaurant that fell within the security perimeter. He said Pittsburgh became a “ghost town” during last year’s G20 summit and his restaurant, Bossa Nova, lost between $30,000 and $40,000 in revenue.

“It was very costly for us, to the point where we’re still trying to recover,” he said. “I really do not know what benefits we will ever reap from hosting that event.”

In Toronto, members of the Waterfront BIA wish they had been consulted when the federal government chose their neighbourhood to host the summit. The BIA has committed hundreds of thousands of dollars to hosting the Redpath Toronto Waterfront Festival on June 30, bringing in 12 tall ships from around the world to dock on the central waterfront.

But with the G20 wrapping up just three days prior, a slew of unanticipated problems has cropped up: What if everyone skips town to avoid the summit? Will the RCMP dismantle the barricades in time? Where will ship captains and crew sleep, now that all the hotels are reserved for G20 delegates?

To make matters worse, the festival is now in direct competition with the Pride Parade, which was pushed back a week to accommodate the G20.

“We could have held our event in the fall,” says a frustrated Carol Jolly, executive director of the BIA. She was reassured June would be the best time for the festival, but “now we’ve got all these things that are kind of pushed on us.”

Resident Mike Brock feels Ottawa made a huge mistake in plunking such a disruptive and inflammatory event in his community’s backyard.

“Everyone knows that these conferences create very, very large protests,” he said. “All it takes is 10 or 20 very violent protestors to turn the area into a war zone.”

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Citizenship and Immigration Canada has announced that, effective April 10, 2010, visa officers will only consider the evidence of language proficiency provided at the time of application.

It used to be that applicants in the Federal Skilled Worker Class and Canadian Experience Class could file any kind of documentary proof to substantiate their language abilities in English and/or French.  If a visa officer was not satisfied that the documentary proof substantiated the level of language abilities claimed, the visa officer would offer the applicant the opportunity to undergo and submit the results of a designated language test.  As of April 10, 2010, however, that “offer” will no longer be an option.

While the downside to this policy change is that (i) applicants cannot buy themselves time to improve their language abilities and (ii) applicants must bear the cost and inconvenience of formal language testing, the upside to this policy change is that processing times will be improved as an intermediate step will be removed from the application process.

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