The Canadian economy, left for dead just a couple short months ago, originates back to life – if barely.
How reckless, excessive borrowing became Canada's national pastime
Philip Cross: Total borrowing in Canada across all categories increased by $77.9 billion this past year, a lot more than the $71.6 billion additional load we took on throughout the 2009 recession
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Real GDP inched ahead in a 0.8 per cent annual rate within the fourth quarter of 2015, and while the imploding energy sector had its thumbprints everywhere (especially within the continued retrenchment in total business spending) the gains in consumer spending, housing and net exports provided an offset.
In fact, the very first inventory withdrawal in a long time (in conjuction with the falloff in imports) seemed to be an issue in depressing headline growth, and outside from the destocking, real growth arrived at a not-too-shabby 2 percent annual rate that is double the amount pace recorded in the U.S. for Q4.
While we are still coming off a brutal year by which real GDP growth slowed to 1.2 per cent for all of 2015 – even with modest upward revisions to prior quarters – or about 50 % what we saw in 2014, exactly why this really is still not dubbed a recession happens because real consumer spending in Q1 was +0.6 percent at an annual rate, +1.9 per cent in Q2, +2.2 per cent in Q3, and +1.0 per cent in Q4.
These are hardly inspiring but take note: every Canadian recession previously contained at least one negative quarter of consumer spending. Not this time around.
And as for residential construction: +5.9 per cent in Q1, +1.3 per cent in Q2, +2.7 per cent in Q3 and +1.8 percent in Q4 – not one negative quarter here, either.
Funny that two-thirds of Canadian GDP escaped 2015 without one negative quarter.
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Business investment was weak and down 13 per cent in the peak – this segment of the economy, indeed, has been in recession. So we had a 12 percent chunk of GDP in recession, true, but that doesn’t whatsoever mean that the entire economy was at recession.
The C.D. Howe Institute may be the final arbiter, however this doesn’t look like the current recession everyone in Alberta and on Bay Street happen to be talking about incessantly for the better part of the past year.
We haven’t even compare yet to feeling all of the lagged impact in the multi-year depreciation in the Canadian dollar, not to mention the large-scale Federal fiscal stimulus that is right around the corner – which alone will add at least half a percentage indicate headline growth.
Is anyone prepared for Canada to emerge as the G7 GDP growth leader this year?
Yes, I’m specifically addressing the 38,090 net speculative short Canadian dollar futures and options positions overhanging the Chicago Mercantile Exchange in the current time.
The industry data were also encouraging, showing a 0.2 per cent month-over-month increase in December on top of a 0.3 percent advance in November.
In contrast to heading into Q4 of this past year, Canada heads into Q1 of this year with a few nice forward momentum – with out them month so far, the “build-in” is 1.0 percent at an annual rate and when our forecasts engage in, we’re able to be in for any 2 per cent-to-2.5 percent annualized pace for Q1 (consistent with exactly what the Atlanta Fed’s GDPNow tracking has become showing for that U.S. for the current quarter, so Canada is no longer lagging).
The Bank of Canada’s latest estimate for current quarter growth is 1.0 per cent – keeping in mind that this is occurring prior even to the fiscal boost, there seems little chance the central bank eases again (two more rate cuts are in the chamber), not to mention starting any dangerous move toward a negative rate of interest policy.
And inside a sign that the competitively supercharged Canadian dollar is playing a supporting role, the December data that reflected trade flows were highly constructive.
Manufacturing production jumped 1.1 percent month-over-month which followed a 0.3 percent output expansion in November, and that we enter Q1 having a 3.4 percent annualized rate of growth about this score which would be the fastest pace in nearly 2 yrs. Transportation and warehousing output rose 0.2 percent on top of a 0.9 percent bounce in November, and wholesale trade surged 1.8 percent after a 1.0 percent November spike and a 0.3 per cent rebound in October.
David Rosenberg is chief economist and strategist at Gluskin Sheff + Associates Inc. and author of the daily economic report, Breakfast with Dave. Follow David and the colleagues at twitter.com/gluskinsheffinc
