Monday, June 30, 2008

Canada’s Economy Rebounds

(Virginia Galt — Globe and Mail)

After the unexpected contraction of Canada’s real gross domestic product in the first quarter of this 2008, it now appears that the economy will post “relatively slow economic growth, but positive economic growth” overall for the year, Federal Finance Minister Jim Flaherty said Monday.

“We’re on track to accomplish that this year …although obviously, the economy has slowed down,” Mr. Flaherty said in an interview after Statistics Canada reported that the GDP rebounded 0.4 per cent in April after declines in February and March.

“One month doesn’t make a trend, of course, but it’s more in line with what the forecasters, including ourselves, were anticipating.”

Mr. Flaherty said the first quarter’s 0.3 per cent drop in the GDP “was a concern – but it was explainable, on analysis, by the factors affecting the auto industry, particularly a strike at a parts plant in the United States.”

Mr. Flaherty said the Statscan report, which showed that manufacturing production rose by 1.9 per cent in April and that the retail sector was up by 0.6 per cent, “reflects strong economic fundamentals in Canada …I am particularly encouraged by continuing consumer confidence in Canada.”

Mr. Flaherty declined to say whether he believes the Canadian economy now has enough momentum to avoid a technical recession – which economists define as two consecutive quarters of negative growth.

“I don’t do that, other than what private sector forecasters say.”

However, several economists said Monday that it appears that the Canadian economy will eke out modest growth in the second quarter and for the balance of this year.

Statscan on Monday cited increases in manufacturing, and wholesale and retail trade in April, offsetting declines in construction, oil and gas extraction and exploration. Read more.