Gross Domestic Product

The Canadian economy managed to grow without a recession for 15 years. But that changed as the worldwide recession drastically reduced its need for Canadian exports. On a geographic basis, the west, with its vast mineral resources has outperformed the manufacturing reliant east. Unlike the U.S., Canada releases GDP data only once a quarter, usually about two months after the reference quarter's end.

 

Growth slowed dramatically in 2008 as seen in the graph below. Although the fourth quarter of 2008 in reality was the first quarter in which the economy contracted, there was little doubt that the recessionless streak had ended. The economy contracted for three quarters before rebounding in the third quarter of 2009. Canada has continued to grow steadily since then.

 

 

As widely expected the Canadian economy slowed sharply in the first quarter of 2015. Following an unrevised quarterly rise of 0.6 percent in fourth quarter of 2014, total output contracted 0.1 percent — its worst performance since the second quarter of 2009. Annual growth slipped from 2.5 percent to 2.4 percent. The deceleration reflected a 0.4 percent quarterly decline in final domestic demand which was largely attributable to a 1.8 slump in gross fixed capital formation. Household spending edged up 0.1 percent while government consumption contracted 0.2 percent.

 

Monthly gross domestic product

In addition to quarterly GDP data, Canada also releases monthly data for gross domestic product at basic prices. The data provide a monthly update on the economy's performance and a check on the quarterly GDP data.

 

 

The economy contracted for a fourth consecutive month in April as the slump in oil prices clearly hit the economy hard. A 0.1 percent decline in total output contrasted with expectations for a modest gain.

 

April's disappointing result was wholly attributable to weakness in the goods producing sector where output decreased 0.8 percent on the month for a cumulative decline of 3 percent since the start of the year. Mining, quarrying and oil and gas extraction (down 2.6 percent) again did most of the damage but manufacturing retreated a further 0.2 percent, utilities dropped 0.7 percent and construction was off 0.1 percent. The overall sector fall would have been steeper but for a 0.5 percent gain in agriculture, forestry, fishing and hunting.

 

Services posted their third advance in as many months led by a bounce in wholesale trade and an increase in accommodation and food. Other decent gains were recorded by real estate, rental and leasing and professional, scientific and technical services. The only decreases of note were in arts, entertainment and recreation alongside finance and insurance.

 

Inflation

There are several price indexes that can be used to sniff out inflationary trends if they exist. They are the consumer price index plus its two major core measures and the industrial product price and the raw material price indexes. The latter two measure producer inflation while the CPI measures inflation at the consumer level. Consumer inflation has remained under control and within the Bank of Canada's target range of 1 percent to 3 percent. In May 2015, the CPI was up 0.6 percent but was up 0.9 percent from a year ago. Core CPI, excluding only food and energy, was up 0.2 percent on the month and was up 1.8 percent on the year.

 

 

Producer prices have been volatile. However, after a period of rising prices, the increases moderated. It should be noted that producers for the most part are unable to pass along high raw material prices. Some of the raw material price changes were exacerbated by exchange rate volatility which in turn feeds back into these prices. Sinking commodity prices sent the RMPI plunging.

 

 

Unemployment — After climbing to a high of 8.7 percent in August 2009, the unemployment rate steadily declined to 7.1 percent. In 2013, the unemployment rate was in a narrow range of 7.2 percent for a high to 6.9 percent for a low. Employment added 135,700 jobs in the year.

 

For the year 2014, employment added 121,300 jobs. The unemployment rate declined during the year from 7.0 percent and was 6.7 percent at year end. In June, employment slipped by 6,400 jobs. Employment now has declined in three of six months in 2015. The unemployment rate was 6.8 percent for a fifth month.

 

 

Merchandise trade — Canada consistently runs a trade surplus with the U.S. and on occasion, Japan — but a deficit with all other trading partners. The trade surplus declined in 2006 primarily because of the relatively high value of the Canadian dollar against most other currencies, but especially against the U.S. dollar.

 

 

The Canadian merchandise trade balance recorded a deficit in December 2008 for the first time since March 1976. The trade balance since then has veered from positive to negative. The balance was in deficit for eight of 12 months in 2011 and for all of 2012. Canada managed a trade surplus in June 2013 and again in February and March 2014. However, it slipped into deficit again in April and again in May. The balance tipped into surplus in June and July. However, in August it once against slipped into deficit. In September, the balance was once again positive. However, since then, the balance has been negative.

 

The trade balance in part, has been affected by the Canadian dollar's exchange rate. The higher value of the currency made Canadian exports more expensive while at the same time, making imports cheaper. The Canadian dollar steadily weakened against the U.S. currency for most of 2013, taking it below parity where it has remained in 2014. This should make Canadian exports more attractive in the U.S. and elsewhere and have a positive effect on the merchandise trade balance. But the deficit deepened thanks to sinking prices for crude oil.