Canada's economy barely grew in the second quarter, new figures revealed yesterday, lending further evidence that growth has stalled amid falling US demand for Canadian exports.
Gross domestic product expanded by just 0.1 per cent over the quarter - just 0.3 per cent on an annualised basis - much less than the Bank of Canada and most private forecasters were expecting. This follows a slip in GDP in the first quarter, and suggests that Canada is skirting the brink of a technical recession.
Second quarter growth in Canada was well below forecasts by private sector economists, many of whom had anticipated 0.7 per cent growth in GDP (not annualised) over the quarter.More bad news:
Exports, long the country's economic engine, fell for the fourth consecutive quarter, down nearly 5 per cent from last year due mainly to falling US demand for cars and lumber.
"The story that Canada's resource riches could help it sustain the US difficulties has gone right out the window in the first half of this year," said Derek Holt, senior vice-president at Scotia Capital Markets.
Several indicators suggest the economy is fraying. Job losses are mounting, housing starts and resale values are slipping, business spending is declining and the Canadian dollar has fallen after strong gains last year.
Canada has so far avoided a full-blown domestic credit squeeze of the kind at work in the US. Consumer spending and corporate profits remain strong, with profits in the second quarter at their highest since the first quarter of 2004.
Canada also benefits from high commodity prices. But global weakness has put a damper on the gains Canada makes from commodities, even though these remain at elevated levels even after recent drops in value.
The sources of strength in Canada in the second quarter are "clearly unsustainable", said Sal Guatieri, senior economist at BMO Capital Markets.
So what can we do at this point?
What's more, the first quarter was revised down to a 0.8% contraction from an initial 0.3% retreat.
The second-quarter bounce allows the economy to avoid the recession label, which is conventionally defined as two consecutive quarters of declining output.
But there is no doubt: This economy has ground to a halt. On a two-quarter basis, growth is at its weakest since the last recession in 1991.
"This is confirmation the Canadian economy is in a significant economic slowdown," said Craig Alexander, deputy chief economist at Toronto-Dominion Bank.
"We can debate about whether a recession is present," Mr. Alexander said. (emphasis added)
Prudent fiscal managers that they are, the Harper gang failed to prepare in this economic backdrop.
While the U. S. government handed out stimulus cheques in the second quarter, much of the pump-priming has already been done in Canada. The federal government has cut taxes significantly and spent like there is no tomorrow.
"The government is so disorganized it's bound to be too little too late," Mr. Orr said.
Our friend Jim Flaherty had this to say about the gloomy financial indicators:
"I think what we are seeing is a shared concern in the province of Ontario and federally ... a shared concern with respect to the need for care and encouragement with respect to the Ontario economy," Flaherty told a Toronto news conference after Statistics Canada reported the national economy had barely avoided slipping into recession.He suddenly feels Ontario's pain! Sharing concern, care, encouragement...it's just so genuine. Whatever has come over him!
But rest assured, despite all of the above, the prudent Conservative fiscal management types who receive so much credit for economic stewardship will be on the job this week, spending like there's no tomorrow as an election is imminent:
Before they're ready to hit the hustings, the Conservatives want to make several major announcements over the coming week, Canwest News Service has learned.Of course they will...
Industry Minister Jim Prentice is in Cambridge, Ont., Tuesday for an announcement about the future of the Canadian Space Agency. Infrastructure Minister Lawrence Cannon is expected to announce the completion of deals with Alberta, Manitoba, and Quebec that will free up billions of federal infrastructure spending in those provinces.
And Harper himself will make a key announcement somewhere in southwestern Ontario about help for the auto industry, sources say.