Economy falters badly
- GDP dropped 0.7% in November following a 0.1% drop in October. The big decline is consistent with our current forecast of an annualized 2.5% decline in the fourth quarter overall. This is expected to mark the first of two quarters of declines and thus flag that the Canadian economy has fallen into recession.
- Employment fell by a record-smashing 129,000 in January and the unemployment rate jumped to 7.2%. The decline was concentrated in full-time jobs (-113,900) and hit Ontario, Quebec and British Columbia the hardest.
- With new motor vehicle sales tumbling and gasoline prices coming down rapidly, nominal retail sales fell by 2.4% in November, their biggest one-month decline since January 1998, thus painting a weak picture of the Canadian economy.
- Housing starts fell 10.9% in January to an annualized 153,500 from 172,200 in December. Urban singles plunged 20.2%, while the multiples component dropped 12.2%. This weakness is increasingly a reflection of the macroeconomic impact of the credit tightening on employment growth.
- The merchandise trade balance posted a deficit of C$0.5 billion in December, the first since March 1976. Exports fell C$3.8 billion (9.7%) — the largest monthly decline since October 1982 — but imports fell by C$2.2 billion (5.7%), which tempered the deterioration in the trade balance.
- Consumer prices fell 0.7% in December and the year-over-year rate slipped to 1.2% from 2% in November. Canada's inflation rate averaged 2.3% in 2008 — the fastest increase since 2003. RBC forecasts that Canada's inflation rate will dip into negative territory mid-year and average just 0.5% this year
I hope this finds you Happy and Healthy!
All the Best!
A. Mark Argentino
P. Eng. Broker
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