Recovery stalls, as GDP records second weak month: StatsCan
February 3, 2012 by Julian Beltrame The Canadian Press
The Canadian economic recovery is showing signs of stalling, with real gross domestic product surprisingly falling back by 0.1 percent in November after no gain the previous month, according to a report from Statistics Canada.
The unexpected contraction after a flat October sets up the fourth quarter of 2011 to come in below the Bank of Canada’s two percent expectation.
Analysts noted that most of November’s weakness was due to one sector – oil and gas extraction declined 2.5 percent, in part due to temporary maintenance shutdowns. But it also shows that there was not enough strength elsewhere in the economy to fill the gap.
There were also drops in wholesale trade, finance and insurance, and construction. Meanwhile, manufacturing, retail trade, accommodation and food services, professional services, and real estate agents and brokers services all posted gains.
Statistics Canada said manufacturing increased 0.6 percent, with growth based mainly in the production of durable goods.
The consensus prediction had been for a 0.2 percent increase in November, particularly coming off of a weak month.
In response, the Bank of Montreal dropped its forecast for economic growth in the fourth quarter as a whole to 1.4 percent, a half-point weaker than it had recently predicted.
And “we don’t foresee any meaningful pick-up in quarter one (of 2012), with growth likely to be just 1.7 percent this quarter,” said Douglas Porter of BMO Capital Markets.
Union economist Erin Weir of the United Steelworkers noted that November was the third consecutive month in which overall economic growth in Canada had decreased.
“The revelation that we fell into negative territory should prompt governments to rethink planned budget cuts,” he said. “Sharply reducing public investment could push Canada’s fragile economy back into recession.”
The latest GDP data dispels any doubts that Canada’s economy is braking sharply from the third quarter’s outsized 3.5 percent bounce, and that there is little momentum going forward.
As last year’s second quarter’s contraction was due to temporary factors – the Japanese earthquake – the strong third also appears to have been mostly catch-up. Put together, Canadian growth has been barely noticeable since March of 2011.