Stage set for another weak year
OTTAWA—The Canadian economy suffered through its second-consecutive below-par performance at the end of last year, setting the stage for another disappointing year of growth and job creation in 2013.
Statistics Canada reported today that the economy squeezed out a mere 0.6 percent advance in the last three months of last year—following a 0.7 percent increase in the third quarter—and was on a downward path in the final month, when output retreated by 0.2 percent.
In reality, the final tally is still about half what the Bank of Canada had predicted in January, and about one-quarter what it had said was likely in October.
Still, economists cautioned the results could have been worse, and in fact expressed relief that most of the weakness in the fourth quarter was due to a $10.3-billion inventory write-down rather than from a consumption collapse.
“Obviously, the headline is pretty sour but the details aren’t terrible,” said Doug Porter, deputy chief economist with BMO Capital Markets.
“There are actually are some slivers of good news,” he noted. “Things like consumer spending and business investment, and even net exports, were a little bit better than expected.
“It suggests the economy is still grinding ahead slowly but surely.”
The markets also saw it that way. The Canadian dollar was down initially on the news but quickly recovered and was up modestly to 97.01 cents (U.S.) by mid-morning.
For 2012 overall, growth in Canada came in at 1.8 percent—down from 2.6 percent in 2011 and the weakest number since the end of the 2008-09 recession.
Many analysts now believe 2013 will be even weaker, at between one percent and 1.5 per cent, and that is if there is no major shock.
The result drew calls from left-wing commentators for more government intervention.
Erin Weir of the Progressive Economics Forum said both federal and provincial governments should invest in public services and infrastructure rather than continuing to pursue austerity measures that crimp growth.
In the Commons, NDP whip Nicole Turmel called continuing spending cuts while the economy sinks a “recipe for disaster.”
The government chose to see the glass as half-full, however.
Conservative MP Shelly Glover, the parliamentary secretary for Finance minister Jim Flaherty, boasted Canada still had the strongest growth rate of any Group of Seven economy in the fourth quarter.