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Canadian Economy Grows, But Shows Signs of Slowing
January 24, 2008
Wholesale trade in Canada was the fastest growing industry for the country in the fourth quarter 2007, according to a recent report from Statistics Canada. The sector saw 9% growth, reflecting an 11% gain in the volume of imports. Manufacturing grew 1.2%.
Overall, the Canadian economy performed well in the fourth quarter 2007, thanks in part to an exchange rate above parity with the U.S. dollar. Output growth was steady in October, while employment rose 0.8% despite a softening in December.
Still, according to the report, there are signs that the economy could slow at the beginning of 2008. The composite leading index decelerated in the last three months of 2007, mostly due to weak U.S. demand for manufactured goods. This slack was offset by continued buoyant gains in consumer spending and housing in Canada.
Overview of 4Q
From January to October 2007, year-over-year growth in real gross domestic product accelerated from 1.8% to 2.8%. All industries expanded, except the primary sector (where incomes still remained high thanks to buoyant prices for oil, metals and grains).
Wholesale trade was the fastest growing industry, up 9%, reflecting an 11% gain in the volume of imports. Retailers were next at 6%, followed by construction and a slew of personal and business services, growing between 3% and 4%.
Manufacturing was up 1.2%, a major reversal from a drop of nearly 4% at the start of 2007. Capital goods and automobiles led this turnaround, while the clothing and forestry-related sectors continued to post hefty losses.
The stronger Canadian dollar has insulated Canadians from the worldwide upsurge in food prices in the past 12 months. Driven by higher prices for grains and corn, food inflation in the euro zone was 4.3% in November, 5.1% in the United Kingdom and 5.4% in the U.S. In Canada, the cost of groceries was up only 0.6%.
By Province British Columbia's economy remained strong in recent months. Shipments in October recorded their strongest gain since April (+1.9%), led by metals, machinery, chemical products and paper. The province remained busy in the run up to the Olympic Games. Employment rose 1.1% in November, due to increases in construction, transportation and recreation, reflecting the ongoing construction of ski resorts and the Olympic village.
Manufacturing was also a source of growth in Quebec. After a weak third quarter, shipments rebounded in October, led by the sharpest rise in transportation equipment since March. Quebec's aerospace industry is in full flight, shipping $1.3 billion more between January and October 2007 than in the same period in 2006, setting a new record. The rebound in this industry was due to major export orders; in October, it moved into first place in provincial exports, ahead of aluminum, as a result of sales to the U.S. and to the United Arab Emirates.
In Ontario, non-residential construction continued strong in October with permits remaining close to the $1-billion mark. Its 31.5% increase from January to October 2007, fuelled by office building projects, led the country, ahead of Alberta's 24.4% jump. This rebound occurred as Ontario posted its strongest increase in service sector employment since 2003. Housing also remained close to the highs posted in 2007.