Conservatives defend economic record amid stalling growth, slumping oil prices

Prime Minister Stephen Harper answers a question during Question Period in the House of Commons in Ottawa on March 31, 2015. (Adrian Wyld / THE CANADIAN PRESS)

The Conservative government is on the defensive after a Statistics Canada report showed on Tuesday that Canada's economy shrunk by 0.1 per cent in January, as wholesale and retail trade eroded and oil prices continued to slump.

The announcement also comes a day after a warning from Bank of Canada governor Stephen Poloz that the "first quarter of 2015 will look atrocious" thanks to sagging oil prices.

On Parliament Hill Tuesday, NDP Leader Thomas Mulcair hammered Prime Minister Stephen Harper's economic plan, criticizing the Conservatives for over-relying on the oilsands as a financial catalyst

"Three years ago we warned the government not to put all of its economic eggs in the same basket but they didn’t listen, and the drop in the cost of oil is predictable -- it is a cyclical thing," Mulcair said in question period.

Mulcair added that Canada has lost roughly 400,000 manufacturing jobs as the Conservatives "simply sat back with their arms crossed."

"This time they can't blame the U.S. economy -- it is their own fault," Mulcair said, referring to the Great Recession of 2008.

January's GDP decline comes after the economy grew by 0.3 per cent in December and declined by 0.2 per cent in November.

StatsCan primarily attributed January's economic slowdown to a 2.6-per-cent drop in whole trade and a one-per-cent decrease in retail trade.

And the opposition parties were quick to point out that big-box retail giants Future Shop and Target are shuttering their doors, leading to mass layoffs.

"Canadian families are facing significant layoffs in the retail sector and we saw another 1,500 jobs lost over the week at Future Shop, but still nothing from the prime minister," said Mulcair.

In face of the attacks, Harper defended his government's economic record, and that said that short-term struggles should be expected given the decline of oil prices.

"The Canadian economy has grown over the past year, and the bank of Canada and all other experts predict it will grow in the year to come," Harper said

"Obviously... we are all aware that there are negative impacts to the economy in the short run due to the fall of global oil prices," he added.

Harper said the best solution to the country's economic woes is to keep tax rates low, and he continued to tout the party's income-splitting plan.

"We think it is more important, now more than ever, to make sure there is more money in people's pockets, (and) that’s why we've cut taxes and provided benefits to every single Canadian family (with) legislation which is before Parliament right now," Harper said.

The Liberals and the NDP also questioned the Conservatives' decision to delay the budget until April.

"It is an economic inaction plan that we are seeing from this government," said Mulcair. "

"The government doesn’t have a plan, they don’t have a budget, the finance minister (Joe Oliver) is completely missing in action," said Liberal Leader Justin Trudeau.

David Madani, an economist at Capital Economics, said on Power Play that Canada was in the midst of a prolonged slump, rather than a "one-month blip."

"The drop in oil prices is going to have a big impact on the Canadian economy. Certainly the pullback in business investment and job cuts is certainly starting to be reflected in the hard economic data," Madani said.

"I don’t think that’s going to be all over in a quarter or two. I think it is going to be with us pretty much for the whole year possibly into next year," he added.

Madani added that while there are some "encouraging signs" that the non-energy sector may improve gradually over the next couple of years, he is more concerned with the "immediate fallout" in the energy sector.

"I think that will really weigh on the economy the whole year," Madani said.

He added that he believes that austerity is not the solution the country's fiscal struggles.

"My sense is that the government could do probably do a bit more to be honest … it is a bit concerning when I hear some governments thinking that austerity is a good idea," Madani said

"Given what's happened overseas I thought politicians would have learned some lessons from that," he added.