Canadian Real GDP Fell 3.4% Annualized Last Quarter

March 2, 2009

Real GDP fell 3.4% at a seasonally adjusted annualized rate (saar) in 4Q08 and by 0.7% from the final quarter of 2007.  The Bank of Canada in January had projected growth last quarter of -2.8% saar, followed by negative 4.8% in the current quarter.  The 4Q drop was Canada’s steepest since 1991 but much less than the plunge of 6.2% in U.S. GDP last quarter. On-year growth was similar to the U.S. drop of 0.8%.  In calendar 2008, growth slowed to an average of just 0.5% from 2.7% in 2007.  Nominal GDP plummeted 13.4% saar last quarter, reflecting lower commodity prices as well as the drop in real GDP.

Monthly Canadian GDP figures indicated that growth declines accelerated from -0.1% in October (not annualized) to -0.7% in November and -1.0% in December. Industrial production and factory output tumbled last quarter by 10.9% saar and 16.1% saar.  Wholesale sales and construction fell by 20.0% saar and 4.5% saar.  Retail sales and the energy sector output posted annualized declines of 2.7%.

Among major components of demand, personal consumption, business spending, and exports each fell sharply.  As a contribution to the 3.4% decline of real GDP, net exports had a positive effect because imports fell even more sharply than exports.  The figures below represent annualized percentage changes between the third and fourth quarters in percent, the percentage point (ppt) contribution of each component to growth in 4Q (these add up to -3.4%) and percentage changes between 4Q07 and 4Q08.

  4Q vs 3Q Contribution Y/Y Chg
Consumption -3.3% -1.9 ppts +0.3%
Investment -14.7% -3.7 ppts -3.8%
Government +2.8% +0.7 ppts +2.0%
Exports -17.5% +2.3 ppts -7.4%
Imports -23.3%   -8.3%
Inventories   -0.8 ppts  

Canada’s current account swung to a deficit equal to 1.9% of GDP last quarter.  That was the first red-ink figure since the second quarter of 1999 and followed surpluses amounting to 0.9% of GDP in 3Q08 and 2.1% of GDP in 2Q08.  The surplus equaled 0.6% of GDP in 2008, down from 0.9% in 2007 and 1.3% in 2006.  The GDP deflator plunged 2.7% (not annualized) last quarter.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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