Canada’s Economy Contracts 0.1 %

01 February 2012 - Which Way to Pay

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Canada’s Economy Contracts 0.1 %

Canada’s gross domestic product showed an unexpected decline in November last year shrinking for the first time in 6 months suggesting a sluggish start to 2012.  GDP contracted 0.1 % to C$ 1.27 trillion, dragged mainly down by the energy sector. Statistics Canada said yesterday that oil and gas production declined which had little affect on the gains made in the manufacturing and other industry services. The results suggest that the last quarter of 2011 is expected to be well under the 2 % annual growth forecast by the Bank of Canada.  Analysts said economic output would have to have grown 0.6 % - 0.7 % in December to meet the bank’s forecasts. These results bring economic growth over the last three recorded months to a slow 0.7 % and may also keep the Central Bank from raising interest rates through the year. It seems today that economists and analysts will be cutting their projections. Doug Porter, Chief economist of the Bank of Montreal has said that the report “shows how the economy is vulnerable to even minor hits.”

There were some rays of light in the report which included manufacturing growing 0.6 %, the third consecutive gain, as foreign demand increased production. The retail trade also increased 0.6 %, the fourth consecutive gain thanks to increased sales in vehicles and clothing. However, when speaking of the results,  Porter added, “While we can brush it off as due to weakness in one sector, the fact is nothing else stepped up to the plate to offset that weakness, and that just shows how sluggish the underlying economy is.” Overall, Mr Porter said, “It does show underlying softened in both growth and inflation. It will give the Bank of Canada plenty of comfort staying on hold.”

Ottawa is preparing for an austerity budget today. The news of this sudden contraction in the Canadian economy may have people worrying that severe cuts could only make the situation worse.

Global Economic Calendar


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Related Links:
• Statistics Canada
For the full report
• Bank of Canada
Canada's central bank
• Latest News
For more Canadian economic and financial news

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