Mid-Spring Showers Lead to a Slower Canadian Economy
GUEST COMMENTARY –
The Canadian economy slowed down during the month of May which will potentially create a devastating financial blow to the second quarter. The Canadian gross domestic product (GDP) won’t look too attractive in the months ahead.
Diana Petramala, an economist at Toronto-Dominion Bank said, “Strapped down by high household debt and weak global demand, the Canadian economy has clearly transitioned into a period of slow economic growth”.
Statistics Canada data has shown that the 0.3 % in expansion in the GDP during April 2012 was brought down to 0.1% in May. Mid-spring created a weaker economic turn out according to GDP results.
It is expected that Canada will grow between 1.6 to 1.8 % during the second quarter according to ScotiaBank’s economists. According to this prediction Canada will be ahead of United States in terms of GDP by 1.5% during the second quarter.
However, Bank of Canada has predicted a 1.8 % growth in the second quarter in their monetary policy report that was released early July. The slow economic growth has caused the Bank of Canada to halt its overnight rate of 1%.
RBC offered a more optimistic prediction of 0.2% growth in May with a slight growth in June. Paul Ferley, assistant chief economist at Royal Bank of Canada also believes that the second quarter will deliver a 1.9% growth in GDP.
Paul Ferley also said “The persistence of modest growth is likely in large part a reflection of a sluggish U.S. growth, declining activity in Europe and slowing growth in a number of emerging economies”. The global economic decline is negatively impacting Canada’s GDP. This economic domino effect displays the great woes of globalization.
There was a 1% increase in mining production however it was partnered with 0.5% drop in Canada’s manufacturing sector. Oil and gas extraction results did not impact the May 2012 predictions because of a 1.5% expansion. The goods and production ingredient to Canada’s GDP was stationary between April-May according to Statistics Canada.
Toronto Dominion Bank’s Diane Petramala said, “The slowdown experienced among Canada’s international peers, in particular the U.S. … and other G7 economies which appear to be mired in recession, is likely to continue to weigh on the all important export sector”.
Canada’s GDP is quite dependent on exports. Canada earned approximately $38.9-billion for its exports during the months of April and May. However exports in energy had dropped 4.3% in May.
Ms. Petramala predicts a continuation of this slow and steady economy for the last half of 2012.