March 8, 2010
Economy at a Glance
Pace of Canada’s GDP growth accelerates in 2009’s fourth quarter to +5.0%
ALEX CARRICK
Chief Economist, CanaData
The nationwide economy grew 5.0% (quarter to quarter annualized) in the final quarter of last year, according to Statistics Canada’s latest update. That was the fastest growth rate since the third quarter of 2000, almost a decade ago.
Growth in the latest quarter was a significant acceleration versus the +0.9% figure in 2009’s third quarter. The three quarters prior to that were all declines, with Q2 09 at -3.5%, Q1 09 at -7.0% and Q4 08 at -3.7%.
The chief contributors to growth in the latest quarter were consumer spending (+3.6%), government spending on goods and services (+5.8%), government fixed capital formation (+16.3%) and private investment in residential structures (+29.7%).
Business investment in non-residential structures (-8.5% annualized) registered the fifth straight quarterly decline. Within consumer spending, durable goods (+10.7%) and services (+4.1%) were the leaders.
Overall growth was also helped by goods exports (+17.4%) proceeding at a considerably faster pace than goods imports (+6.9%).
Canada’s +5.0% growth rate in the fourth quarter compares with the recently revised +5.9% gain for the same period in the U.S. It should be noted, however, that Canada’s descent into recession was not as steep as was seen south of the border. Hence the percentage change numbers coming out of the trough should not be as large.
Unlike the U.S., where a moderation in the inventory decline made a contribution to gross domestic product growth in Q4 09, Canada saw a larger cut in non-farm inventories in the fourth quarter than in the third.
Other sectors mentioned in the report as aiding the recovery include: natural gas exports (due to higher prices), non-metallic mineral mining (which includes diamonds), real estate agents and brokers fees (thanks to strong resale markets), furniture and fixture sales, motor vehicle and parts production and wholesaling activity (due to stronger retail trade and a more active foreign trade sector).
Corporate profits before taxes is an income measure and it appears in current dollars. The latest quarter-to-quarter change in profits was +9.0% (not annualized). This was about the same rate of increase as in the third quarter (+9.3%). Both of these figures were much better than the three quarterly declines recorded from Q2 09 back through Q4 08.
Strong overall economic growth, inventories cut back to base levels and good corporate profit gains are all precursors to private sector investment beginning to pick up toward the end of 2010.
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
Based on quarterly constant dollars, seasonally adjusted at an annual rate (SAAR figures).
For the U.S., chained 2005 dollars; for Canada, chained 2002 dollars
Data sources: Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce and Statistics Canada.
Chart Reed Construction Data – CanaData.
