Canadian Economic Growth a Surprise
By Nicole Halseth, News Editor
The Canadian economy increased far more than expected during the last three months of 2013, growing at a 2.9% annual pace. Despite a 0.5% monthly contraction in December 2013, largely due to the devastating ice storm in central Canada, the economy came out much better than forecasts predicted.
According to the Bank of Canada, in the fourth and final financial quarter of 2013, Canada’s economy was only supposed to grow at a rate of 2.5%. As such, this marked the best financial quarter Canada has seen in over two years. It even outdoes economic growth in the US, where annualized economic growth was dropped to 2.4% on 28 February from the initially estimated 3.2%. Additionally, this growth exceeds the 2.7% seen in the third quarter last year.
According to the Globe and Mail, Statistics Canada claims this increase is due to “oil-and-gas and mining production, manufacturing, household consumption and higher business inventories.” The Canadian economy also saw an increase in the public sector, finance and insurance, as well as retail and wholesale trade. However, declines were seen in sectors like business investment, construction, and agriculture.
Economists across the country have also cautioned against taking these numbers as a unilateral indicator that Canada’s economy is flourishing, especially when the details of this growth are examined further. Half of the growth can be attributed to the building up of inventories, while households with major debt also contributed significantly to the growth.
Scotiabank economists Derek Holt and Dov Zigler said in a research note that “There was little breadth in the sources of growth.” Additionally, chief economist for the Bank of Montreal, Douglas Porter, referred to the GDP report as a “mixed bag.” He used the already less promising GDP record of 2014 as support for this statement. However, Porter also claimed that the Canadian economy “looks to have had better momentum than widely appreciated,” as early 2013 estimates for the fourth quarter were much lower than the actual growth recorded. As a whole, the 2013 fiscal year saw a gross domestic product expansion of 2% annual rate. This was an increase from the 1.7% rate in 2012.
Despite what the economy may be doing on paper, other factors must be considered when examining the overall health of the Canadian economy. For example, long-term unemployment (at an unchanged 7% from last year) and involuntary part-time work levels remain significantly elevated in our labour market since the recession. This has led to increased underemployment.
According to the Globe and Mail, “The proportion of people without work for 27 weeks or longer has risen to 19 per cent of the total unemployed, compared with a share of 11.9 per cent in January, 2008.” The length of time an individual remains unemployed is also increasing. These factors, combined with a large number of other social indicators, show that any reported growth in the Canadian economy must be met with a degree of skepticism.