Huge Deterioration of Canadian Growth and Current Account

August 31, 2011

Canada’s current account deficit widened 52.2% between the first and second quarters and to 3.6% of GDP from 2.4% of GDP.  Net exports exerted a gargantuan 5.7 percentage point drag on GDP growth in the second quarter, as exports sank 8.3% annualized while imports advanced 10.0%.  Consequently, real GDP unexpectedly contracted 0.4% annualized last quarter, and the four-quarter rate of growth slowed to 2.2% from 2.9% in 1Q11, 3.3% in 4Q10 and 3.8% in the year to 3Q10.  This report abruptly ends a five-quarter string of decent annualized growth rates: 5.6% in 1Q10, 2.3% in 2Q10, 2.5% in 3Q10, 3.1% in 4Q10 and 3.6% in 1Q11.  Between the first and second quarters of this year, personal consumption and government spending each climbed at annualized rates of 1.6%, and an 8.1% rise of business investment was the leading source of economic growth, followed by inventories which along with the statistical discrepancy enhanced GDP growth by 2.3 percentage points. 

The monthly series of GDP growth firmed 0.2% in June.  Such was 2.0% higher than a year earlier, with on-year gains of 1.2% in goods but no change in industrial production.  Service-sector output was 2.3% greater in June than a year earlier.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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