In late October, Canadians were surprised to learn the news
that their economy shrunk last month by 0.1% according to national data. This
mining, quarrying and oil and gas sector and manufacturing slipped back by
around 1%. This was tied to lower prices of these goods dropped. This
came after ten months of economic growth in Canada, surprising Canadians who expected
the economic recovery to continue. This announcement of a growth slowdown or
even contraction possibly continuing caused the Canadian dollar to fall in
value by 0.6% against the US dollar. But because the economy grew strongly in
the first half of the year, many economists predict that growth for the year
will still reach 3%. The growth that
Canada enjoyed in the first half of the year was considered due partly to
rising international trade revenues. Since May however, Canada’s exports have
been decreasing.
In addition, higher government spending including on an
enhanced child benefit--which is a tax-free monthly
payment by the government to eligible families to help them with the cost of
raising children – helped stimulate consumption growth. A future risk that
looms on the horizon for Canada however is that the North American Free Trade
Agreement will be cancelled by the US under Trump.
https://www.bloomberg.com/news/articles/2017-10-31/canada-s-economy-unexpectedly-shrinks-in-august-key-takeaways
http://www.reuters.com/article/canada-economy/wrapup-1-canadian-economy-slows-reinforcing-central-bank-caution-idUSL2N1N51FL
It seems as though Canada, despite this contraction, is still very healthy economically. This is especially seen in their success in exporting goods and services in the first half of 2017. It will be interesting to see if NAFTA holds and how Canada will react if it winds up being cancelled. If this happens, Canada will have to become more self sufficient and begin selling more goods domestically.
ReplyDeleteA plus side to this is, with the depreciation of their dollar--It's now cheaper for us to go skiing in Canada this winter. Woohoo.
ReplyDeleteOne reason this could’ve happened is because they reached their steady-state and they are unable to grow anymore. The shutdown of very strong industries has a factor of why the growth is slowing down. This is because they are producing fewer outputs, which leads to lower income and therefore lower consumption. This could also affect the interest rates which would decrease investment. Since they were already growing at this point the lower output will slow down their growth.
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