Canadian Real GDP Expanded 1.3% saar Last Quarter

December 1, 2008

Real GDP rose 1.3% at a seasonally adjusted annual rate in 3Q08 but only 0.5% from 3Q07 due to a flat first half this year. Growth rates in 1Q08 and 2Q08 were each revised slightly higher to -0.6% saar and +0.6% saar. Real GDP had advanced 3.1% in the year to 3Q07. U.S. real GDP, by comparison, declined 0.5% saar last quarter and rose 0.7% from 3Q007.

Consumer spending of 0.2% saar last quarter was sharply lower than the gains of 4.3% in 2006 and 4.5% in 2007. Exports and imports each dropped last quarter and by 5.6% and 1.2%, respectively, from the third quarter of 2007. Business investment, which had risen 7.1% in 2006 and 3.9% in 2007, essentially flat-lined last quarter and rose just 1.4% between 3Q07 and 3Q08. Government spending stalled after rising 3.7% in 2007 and 0.8% saar in 1H08. Growth last quarter was similar to expectations but would have been weaker had inventories not built up. Third-quarter growth was front-loaded into July; GDP rebounded just 0.1% in September from a 0.5% decline in August. In September, production in the energy sector fell by 0.9%, and total industrial production decreased 0.3%. Officials expect negative growth in both the final quarter of 2008 and the first quarter of 2009, and the Bank of Canada will be cutting its 2.25% overnight rate target to less than 2% on December 9th. A peak rate of 4.5% was maintained from July to December last year.

In elections on October 14th, the Conservatives failed to secure a majority of parliamentary seats, but a fractious opposition enabled Prime Minister Stephen Harper’s party to stay in power as a minority government. Harper has resisted mounting calls for a big fiscal stimulus, and this is uniting the opposition, which will try to oust the Conservatives in a vote of no confidence.



Comments are closed.