New data released today by Statistics Canada has revealed Canadian economic growth was slower than expected in 2012 – and that slack may continue into the next year. According to the report Canadian Economic Accounts, Fourth Quarter 2012 and December 2012, total growth last year was a mere 1.8 per cent – shy of the Bank of Canada’s 1.9 per cent expectation, and down from 2011 levels of 2.6 per cent.
The BoC has stated hopes that growth will increase a full two per cent in 2013, but reports of economic weakness point to stimulus conditions sticking around – the bank has kept national interest rates at one per cent since September 2010 in the hopes of improving cash flow and encouraging consumer spending. Now, it’s looking likely that this will remain unchanged into 2014.
The Economic Culprits
Shaky conditions on the global economic scale are being felt on the Canadian home front – Eurozone uncertainty and U.S. fiscal turmoil continue to damper our nation’s export industry, and have created new fears over a possible currency war, and the possible impact on the Canadian dollar. The StatsCan numbers also point to sluggish GDP growth, slow housing market, and struggling key industries as cause for low growth rates.
Gross Domestic Product was up only 0.2 per cent in the fourth quarter of 2012, month-to-month, however, levels were down 0.2 per cent by industry. Annualized, Canada’s growth dropped from 2.1 per cent in Q1 of last year to 0.6 per cent in the fourth, signalling an economic stall that hasn’t been experienced since since the 2008 recession.
What’s Driving the Canadian Economy?
The oil and gas industry continues to push industrial growth, followed by gains in construction, the public sector and utilities. The finance and insurance sectors also experienced modest gains – possibly a sign that Canadians are looking for help getting their finances back on track. In comparison, the manufacturing industry took a significant hit by 2.2 per cent, along with transportation and warehousing. Arts and entertainment also took a tumble, due in part to the long-lasting NHL lockout.
Consumer spending helped boost feeble growth, as household consumption rose 1.9 per cent. However, this is paltry compared with 2.4 per cent seen in 2011.
Government spending was also minimal, increasing a total of 0.4 per cent over the year compared to 2008, when it had increased by 4.6 per cent.
Canadians Are Making More Money
The stats also found that Canadians are bringing more home from the office, as disposable income rose by 3.4 per cent. They’re also upping their savings efforts, as shown by a slight rise in the household savings rate to four per cent, up by 3.8 per cent in 2011. The Household Debt Service ratio, which factors household mortgage and non-mortgage interest paid divided by a household’s disposable income, also decreased to 7.5 per cent, an indicator that perhaps Canadians are reigning in their credit use.