July 31, 2009 4:01 p.m.
Stats Canada released GDP data for May which showed that the real GDP fell by 0.5 % a much larger percentage than had been expected by many economists. Over the past four months the GDP has fallen by 0.1 % in April, 0.3 % in March, 0.1 % in February and 0.5 % in May. This fall reflects the smaller stimulus program in Canada than the U.S., the later start to the recession in Canada, the decline in mining and oil and gas exploration and development and the ongoing very substantial decline in manufacturing because of the sharp drop in the export markets in the U.S.
In May total goods production fell 9.9 %, the energy sector fell 2.3 %, manufacturing 1.6 % but with a fall of 21 % in auto production and 8.2 % in auto parts production.
It may be time for a version of the highly successful U.S. cash for clunkers exchange program to be implemented in Canada.In the U.S. in four days this program resulted in the sale of 250,000 new cars. It has been renewed to the tune of another 2 billion dollars.
Other declining Canadian sectors included construction down 0.7 % and residential building down 2.4 % Retail trade was actually up 0.6 %.
As the American economy begins to recover the Canadian economic situation should begin to change. In the meantime the government should both accelerate and increase the 46 billion $ stimulus programme and ensure that the Bank of Canada is vigilant in keeping interest rates very low.
The Canadian dollar may also weaken against the US currency as the news is digested and if the the two countries continue in the months ahead moving in an opposite direction in terms of recovery. For the moment however the dollar remains above 92.7 cents U.S.
No comments:
Post a Comment