Canada’s way out of recession remains clouded

11-01-2009 10:22

Despite hopes about a recovering Canadian economy, yesterday’s GDP figures demonstrated that it contracted by 0.1% in contrast to the previous month. Data provided by Statistics Canada, commonly called StatCan, showed zero growth in July, while economists believe that Augusts’ data don’t point to a crisis.

Consistent pattern

Toronto-Dominion (TD) chief economist Don Drummond stated: “The Canadian economy has left the worst of the recession behind, although it contracted this month. However, there are sufficient indicators that show a rather consistent pattern. The period March – April has been the most intense phase of the recession and after that period the situation is improving.”

Possible economic growth of 0.6%

The US economy posted an economic growth of 3.5%, on a yearly basis, in the third quarter, proved by Thursday’s figures. The Canadian third quarter figures will not be released for another month.
Growth in the housing market, improving retail sales and the recent climb in Canadian exports will probably lead to an economic growth of 0.6% in September, as the economy will grow by 1.3% in the third quarter.

Artificial growth

The Toronto-Dominion Bank reported that 1% of the 3.5% growth in the US was mainly caused by rising car sales as a result of the Car Allowance Rebate System (CARS) program. This $3 billion deal stimulated consumers to buy cars, creating an artificial growth of the quarterly gross domestic product.

Employment grew

CIBC World Markets economist Meny Grauman commented: “Indeed, the initial test turned out rather disappointing. The Canadian economy appears to have grown considerably less than the American economy in the third quarter, but the US labor market remains affected by a protracted labor market decline.” The US economy showed a loss of 768.000 jobs in the third quarter, while employment in Canada grew by 13.000 jobs during the same period.