The recession is over but not the pain.

Canada's central bank predicted Thursday that the economy would expand this quarter, suggesting the economic contraction lasted for about nine months, considerably shorter than the previous two recessionsin the early 1990's and the early 1980's.

The bank of Canada's reassessment of the state of the economy is perhaps the clearest signal yet that the worst or the recession is over.

Buoyed by the prospect of better days ahead, investors rushed to buy Canadian stocks, adding new life to a near five-month rally that economists said has played a big role in reversing Canada's fortunes.

Yet Bank of Canada Governor Mark Carney stopped short of celebration, saying it will take more than a year to replace the wealth destroyed by the financial crisis.

"We are on track for the recovery both in Canada and glogally," Mr. Carney said at a news conference. "But it's early days,. It's a long road."

As it turns out, policy makers underestimated Canadian consumers' ability to weather the deepest global recession since the second world war and the central bank's own ability to erect a bulwark against the storm.

Mr. Carney and his senior deputiesremain surprised that household credit continued to expand through the recession, providing a measure of support for domestic spending that kept the collapse in exports and rising unemployment rates from taking a greater toll.

The fact that family borrowing continued to increase at its historic pace of about 8 per cent a quarter reflects an INCREASE IN HOME BUYING - purchases that were incouraged by mortgage rates that fell to record lows as the Bank of Canada dropped its benchmark lending rate to an unprecedented 0.25 per cent and set up emergency cash auctions to ensure banks has access to enough money to continue lending.

It will be months before Statistics Canada officially dates the lastest economic downturn.

Rod MacWhirter

Rod MacWhirter

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