Experts temper optimism over economic recovery
CTV.ca News Staff
Published Monday, August 31, 2009 8:29PM EDT
Last Updated Friday, May 18, 2012 11:42PM EDT
New figures showing slight monthly growth in the Canadian economy have raised the possibility that a months-long recession could finally be near, but politicians and economists have warned there still may be tough times ahead.
Statistics Canada released figures Monday showing that the economy had grown 0.1 per cent in June, the first time that a monthly gain had been seen in Canada since July 2008.
However, the 0.1 per cent increase was about half the level of growth that had been expected by the private sector.
"It's the trade, or the external sector that's one of the key drags," Millan Mulraine, an economic strategist with TD Securities, told CTV News Channel. "In fact, exports decline by (an annualized rate of) 19 per cent in Q2. And you can't sustain that pace of deterioration and expect your economy to grow.
"We still expect to see the economy shedding jobs."
Corporate profits were down 11 per cent during the same period, marking the third straight quarter with a double-digit decline.
Other Statistics Canada data showed that consumer spending rose 0.4 per cent in the same quarter, in part because of improved auto sales. Housing sales were also up, posting an 8.3 per cent increase in the national home resale market.
Personal income saw a slight increase, edging up 0.9 per cent in the first quarter, while employment insurance benefits soared by 23 per cent.
The mixed figures have prompted speculation from economists as to whether or not Canada has exited -- or may soon exit -- the recession it has been mired in since last year.
"The Canadian dollar is going to be the rate-limiting step here. It's going to hold back the pace of recovery in the Canadian economy, combined with what are extremely bloated inventories in Canada's business sector," Derek Holt, vice president of Scotia Capital Economics, told CTV News Channel.
Douglas Porter, the deputy chief economist at the Bank of Montreal, said the June numbers suggest that the recession ended in the middle of the year. But it's not clear whether the Canadian economy would be able to remain out of recession.
"The bigger issue is how robust and sustainable the recovery is. This could be a very halting recovery," he said.
Speaking at a news conference in Ottawa, Transport Minister John Baird discussed the progress of the stimulus-related projects that were initiated in the wake of the recession.
He said that the government's approach to stimulating the economy was working, but cautioned that a recovery in the near future was not certain.
"While we see light at the end of the tunnel, we're still in the middle of a global economic recession," Baird said Monday morning. "A potential recovery is still both tentative and fragile."
Technically, Canada's economy will not be declared out of recession until officials see economic performance numbers from the third economic quarter, the July to September period.
The Canadian economy began shrinking in the fourth quarter of 2008. Since last October, 414,000 jobs have disappeared from coast to coast.
If the recession has indeed unofficially ended, economic numbers show that it was one of the steepest contractions since the Great Depression. Statistics Canada calculates that the economy shrank by 6.1 per cent during the first quarter of 2009, beating out recession rates from the early 1990s.
With files from The Canadian Press