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Canadian Consumer Spending On Furniture & Bedding Grows 2.9%

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The economy in Canada is performing a bit better than the one of the USA. It has been progressing at a rate of 2.9% last year. We believe that this rate will be repeated this year and lose only moderately in speed in 2007. Personal income growth advanced at a healthy pace of 5.0% in 2005. It is likely that growth will be at a slightly faster pace of 5.7% this years but in conjunction with the US slowdown - decelerate to below 5% next year. Much of the growth impetus goes on account of higher prices. If the impact of inflation and taxes is eliminated, the performance is more modest. Growth of real disposable income in 2005 was only 2.5%. If income taxes will be lowered as promised by the new government, growth may be slightly faster in 2006, estimated to be about 4.4%. The Canadian residential housing market was still healthy in 2005. It advanced by 3.2% (on a value basis), down from 7.8% the year before. However, the market is saturated now and demand is waning. We predict a growth rate of only 3.6% in 2006. If mortgage rates continue to climb it may even fall below 2.0% in 2007. In unit terms, this represents a drop from 225,000 in 2006 to less than 200,000 next year. Canadian consumer spending is an important positive force contributing to the economy’s overall growth. It rose at a rate of 3.9% in 2005 and an anticipated 4.1% this year. Due to the slowing economy and rising interest rates, we anticipate a lesser growth rate of about 3.0% for 2007. Expenditures for durable consumer goods (which includes furniture) are even more buoyant. Growth stood at a healthy 5.8% in 2005 (up from 2.5% in 2004). This year’s rate will be similar. However, if consumer confidence declines and interest rates continue to climb, we expect durable consumer good sales to advance by only 3.5% next year. The Canadian furniture market (at retail prices) has been plowing ahead without interruption since the third quarter of 2002. Growth stood at 6.2% in 2005. Indications are that growth will continue this year at a similar pace. For 2007, we predict a slowdown to a still respectable 4.4%. The size of the Canadian furniture market in 2005 stood at C$ 10.2 billion (evaluated at retail prices) and if our growth predictions are correct, the market valuation will reach C$ 10.8 billion this year. For more information contact AKTRIN Furniture Information Center Tel.: (905) 845 3474 E-mail: aktrin@aktrin.com

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