U.S. Economy Overview

 The U.S. economy grew at an annual rate of 1.0 percent in Q1 2008 (0.1 percentage points higher than previous estimates), compared with 0.6 percent in Q4 2007, according to the Bureau of Economic Analysis. The persistent slow growth of the U.S. economy reflects continued weakness in the residential housing market, as well as downturns in consumer spending and slower business investment growth.

The Bureau of Economic Analysis also reports that in May 2008, personal income increased by 1.9 percent, while real disposable income saw a monthly increase of 5.3 percent compared with an increase of 0.1 percent in April.

These positive numbers reflect provisions of the Economic Stimulus Act of 2008, which saw most Americans receive tax rebates that should either prevent a recession or make one relatively brief. These rebates will put about $120 billion in the hands of American consumers in the hopes that they will spend it, thereby boosting a faltering U.S. economy. This package also provides for some tax breaks for businesses.

In 2007, weakness in four industry groups: finance and insurance; real estate; construction; and mining accounted for most of the slowdown in economic growth. This is in contrast to the information-communications-technology industries that increased 13.2 percent in 2007, the fourth consecutive year of double digit growth for these industries.

Population growth in the U.S. continues at a rate of nearly 1.0 percent annually despite current economic concerns. The Fund further expects that new immigrants to the U.S. will seek out rental housing rather than buying homes, at least initially, thereby increasing demand for rental housing. As well, vacancy rates are at or below long-term averages in most markets, propelled by continued job growth and low unemployment.

Another key side effect of the current slowdown in the U.S. economy is the weakening of the U.S. dollar. With the Canadian dollar trading close to its 40-year high in relation to the U.S. dollar, the Fund believes that this is an opportune time for Canadian investors to invest in a U.S. dollar denominated vehicle. Over the long-term exchange rates among various currencies on average stay at the same level or change very slowly; therefore, when exchange rates revert back to historical average levels, investors will gain extra value from repatriating profits in a now stronger currency.