May 21, 2012

February 11, 2010

Economy at a Glance

Canada’s +0.4% GDP advance in November a pleasant surprise

ALEX CARRICK

Chief Economist, CanaData

Statistics Canada reported recently that the nation’s gross domestic product in November 2009 advanced 0.4% versus October 2009. This was the month-to-month change (not the annualized increase) in “real” inflation-adjusted dollars.

The +0.4% figure was the third monthly increase in a row. The three-month moving average “smoothed” figure was also +0.4%, its highest level since February 2007 (see graph). Some of the highlights from the report are as follows.

Highlights

Goods-producing industries (+0.6%) grew faster than services (+0.4%). Mining and oil and gas extraction made a significant advance. Part of the increase in oil production was due to stronger foreign demand. The mining sector also forged ahead as copper, nickel, lead and zinc producers upped their output levels, after bringing some operations back online in October.

Wholesale trade surged forward, while retail trade was mildly negative. The finance and insurance sector grew 1.2% in the month due to bond market activity and a leap in mutual fund sales. Personal loans and mortgages also trended upward, thanks to record low interest rates.

The home resale market continued to do very well. This provided an ongoing lift to real estate agent and brokerage firm sales and incomes. Residential building construction recorded a 2.5% gain in the month. Engineering and repair work was also up (+0.6%), but to only a minor degree. In non-residential building construction, an increase in institutional work was more than offset by declines in the commercial and industrial sub-categories.

U.S. fourth-quarter GDP

The good news about the Canadian economy was matched by the latest GDP figures reported in the U.S. The Bureau of Economic Analysis, in its just-released fourth-quarter “advance estimate” wrap-up records a 5.7% jump (annualized) in real GDP versus the third quarter of last year. This was considerably in excess of the +4.5% figure that most analysts had been expecting.

Given the surprising strength in both economies, there are two big questions outstanding:

1) How soon can a more significant improvement in job markets be expected? Perhaps sooner than the second half of this year, which had been the scenario formerly anticipated.

2) Will the timing of central bank interest rate rises need to be advanced versus what had previously been planned? It increasingly appears that self-sustainability of the recovery is in place. Achievement of such a goal is often listed as a pre-requisite for rates to be set free from their current record-low levels.

For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog. His lifestyle blog is at www.alexcarrick.com