Shrinking GDP suggests Canada hit by global slowdown
The Canadian economy shrank in August -- the first time in six months -- which economists suggested is a sign the global economic crisis is dragging on Canada.
Figures released Wednesday showed that Canada’s real gross domestic product shrank by 0.1 per cent, which is equal to about a $2 billion loss to the Canadian economy.
The news came as a surprise, after economists predicted growth of about 0.2 per cent.
“It’s below average, a little bit slow for comfort, and I think the headline here is the global slowdown is starting to affect the Canadian economy,” BMO senior economist Doug Porter told CTV News.
The slowdown affected 10 out of 18 sectors of the economy, including manufacturing, construction, mining, and oil and gas extraction.
The declines included:
- 6.6 per cent in real estate
- 0.6 per cent in manufacturing
- 0.1 per cent in construction
- 2.8 per cent in mining
- 0.4 per cent in oil and gas extraction
The loonie, which has been hovering around parity, has dragged on some industries, such as the auto sector. Other industries have been affected by the economic crisis in Europe, tepid growth in the U.S. and a slowdown in China.
During question period in the House of Commons Wednesday, NDP MP Peggy Nash accused the federal government of “ignoring the warning signs” of economic trouble ahead.
However, Finance Minister Jim Flaherty dismissed concerns of a long-term trend.
"It is one month," he told reporters on Parliament Hill Wednesday.
"There is some weakness in Europe certainly, and the American recovery is slow. We are going to see variations month to month, but overall for the year we are on track with GDP growth."
On Monday, after meeting with private sector economists in Ottawa, the finance minister predicted that Canada’s GDP will be about $21 billion lower than expected this year, and $29 billion lower over the next two years.
That would mean about $1.8 billion less in tax revenue headed for federal coffers.
Flaherty is expected to deliver his fall economic update in the coming weeks, which he said will reflect the latest figures.
Meanwhile, Bank of Canada governor Mark Carney testified before a Senate committee on Wednesday that he does not expect a full economic recovery for another year.
“Following the recent period of below-potential growth, the economy is expected to pick up and return to full capacity by the end of 2013,” Carney said.
With files from The Canadian Press and a report from CTV’s Richard Madan