Canada's Economy In 2007

Posted on Thursday, April 10 at 19:45 by N Say

Thursday, April 10, 2008

Study: Canada's economy in†2007†

Thanks largely to the money earned from resources, Canada defied the conventional wisdom and was able to overcome several obstacles to steady economic growth, according to a study released today in the Canadian Economic Observer. These hurdles included the slowing US economy and the credit squeeze in global financial markets.

Events in the real economy played out against the backdrop of continued rapid shifts in prices in some markets. The Canadian dollar continued its five-year ascent to reach parity with the US greenback by the end of†2007.

The loonie began to take off late in†2002, just as commodity prices started their historic climb. This price boom began initially in energy, before soon spreading to metals. The largest increases in†2007†were for agricultural products.

Meanwhile, prices in global financial markets were exceptionally volatile throughout the year. Last year's global financial turmoil joined a long list of crises from the past decade. The economy has shown its ability to absorb and adapt to most of these shocks in financial markets.

While many prices in commodity and financial markets were gyrating more than ever, growth in the real economy of output and employment has never been more steady. In the last four years, real gross domestic product (GDP) expanded by†3.1%,†3.1%,†2.8% and†2.7%: easily the most stable growth for any four-year period on record back to†1961.

Canada surpasses US growth

Real GDP growth of†2.7% in Canada was barely affected by the slowdown in the United States, where GDP growth eased from†2.9% in†2006†to†2.2% last year. This was the first year growth in Canada surpassed the United States since early this decade.

It is worth recalling how large the gap between growth in Canada and the United States can be when the latter falters: in†2001, Canada's GDP growth of†1.8% was almost triple the†0.7% in the recession-plagued United States, while the†2.9% increase in†2002†was nearly double the†1.6% gain in the United States. The widely-held myth that "Canada catches cold when the United States sneezes" was debunked years ago: so far in†2007†and†2008, we have barely sniffled while contagion spread in US housing and financial markets.

Canada's steady growth last year, despite the slowdown in the United States, sheds some light on the recent debate about how much Canada can "decouple" from the US economy. To date, the slowdown in the United States has been largely confined to housing and autos, both of which contracted for a second straight year, and of course the financial sector.


Commodity output slow to respond to high prices

Profits, investment, exports and sales of resources all soared in recent years, but output and employment in the primary sector grew at only about the same rate as the overall economy. This gap reflects how the commodity boom was largely a price phenomenon.

Since†2002, the volume of output in the resource sector rose just†11%, less than the†14% growth for the overall economy. Meanwhile, employment in resources rose†13.6%, implying a drop in output per employee.

The gap between employment and output growth was driven by mining, where jobs jumped†25% between†2002†and†2007†but production rose only†9%.

Manufacturing restructures

Manufacturing sales by industry in†2007†showed almost exactly the same pattern of increase or decrease as seen on balance since†2002. Clothing, forestry products and autos all continued to post large declines, while small drops were seen for printing, beverages and tobacco, rubber and plastic, and computers and electronics.

These losses were offset by rapid growth for petroleum, primary metals, aerospace, machinery, metal fabricating, non-metallic minerals and chemicals. Food, furniture and miscellaneous manufacturers contributed modest gains.


Household spending accelerates

The growing wealth of Canadians was reflected in a†4.7% gain in the volume of consumer spending in†2007, its largest annual increase since†1985.

Flat-screen TVs continued to fly off the shelves of retailers. Auto sales set a new record of†1.686†million units. Despite high gasoline prices, sales of trucks rose while passenger cars fell slightly, lifting the share of trucks in all vehicle sales to a record†49.2%. This helped boost gasoline consumption a further†3.6% last year, despite record high prices at the pump.

Another measure of the growing purchasing power of Canadians was a sharp increase in travel abroad, especially to overseas vacation destinations rather than short shopping trips to the United States: travel overseas rose†9.8%, while trips to the United States were up†6.1%, including a†3.3% increase in same-day auto trips.

Regional differences continues to narrow

It has become commonplace in recent years to characterize Canada as divided between a booming resource economy in the West and a slumping manufacturing sector in the East. In†2007, this was more a falsification than a simplification.

Regional differences in job growth were less pronounced than in recent years. For the first time since†2004, every province posted higher employment. While Alberta continued to lead with a†4.7% gain, growth accelerated in every other province.


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  1. by RPW
    Thu Apr 10, 2008 6:20 pm
    Let me see now:
    foreign companies come in, exploit resources, ship same out of country, send profits out of country, leave behind a few miserable wages (for some), and a few taxes (very little), and we actually rejoice over the few crumbs they leave on the table?

    It's called spending one's capital -- and what compounds this ludicrousness is that we then take these crumbs and send them out of the country for the food we are used to having, and the baubles we think we enjoy.

    Where is our "rainy day" account?

    Where is the reserve to deal with "Tar Ponds West"? ... -pollution

  2. Fri Apr 11, 2008 3:07 pm
    So called "economists" should take a few elementary business accounting courses that also feature "liabilities " and "debits".

    As I wrote before, what started me of into economics was one sentence by Herman Daly in the early '80s: "In economics everything goes on, nothing comes off!"

    As RPW says, and I have also been writing for many years, any business running on presently used economic calculations would go bust in no time.

    The sale of resources is not an income. StatsCan reports the dismantling of factories and the sale, or removal of their production machinery abroad, as "machinery exports".....the list of their idiocies goes on and on.

    Increased sales of anything, especiallly of imports, like flat screen TVs, are not necessarily economic benefits, indeed, could be very harmful to any economy and the ecology. E.g. There are no longer any repair facilities in many towns and locations for the repair of electronic equipment. When something breaks, it goes into the dump and people are forced to buy new.

    A couple of years ago my 4 year old computer was beginning to act up, so I went to Staples to see what to replace it with? When the saleswoman heard that I had a 4 year old one, she was surprised and said: "Nowadays they build them to last only 1-2 years on account of the technical advances".

    Well, I needed no technical advances, so I had a friend build me a simple one with super heavy duty parts, that cost me less than a store bought one.

    Our partner is a highly trained, Swiss master mechanic and we have his shop on our land, where he repairs everything from chainsaws to the biggest logging equipment.

    I'm driving a 1980 truck, with an easily accessible and repairable engine and was looking at some of the new trucks and cars with their hoods up and couldn't even see the engine, so I asked him what it was all about ? He said: "Unnecessary garbage!"

    Our whole life is filled with "unnecessary garbage", but it jacks up the GDP and our braindead economists can report "growth", while the world is going down the drain and into self destruction, but as one of their prophets, Julian Simonm said: "Humanity always managed to find new resources and solve problems", so everything is allright, while they're calling the worst cases of waste and environmental destruction "efficiency", because some crooks make lots of profits. Even when it goes out of the country.

    Will humanity ever wake up and smell the rot of fraud, before it commits suicide ?
    Even if the criminal theories taught in our universities not only legalize, but approve and urge this crime wave to go on and on, while calling it a "science".

    Ed Deak. Big Lake, BC.

  3. Fri Apr 11, 2008 5:49 pm
    "RPW" said
    Where is our "rainy day" account?

    No kidding!
    We had a $14 billion surplus but Harper gave it away:

    "Perhaps the biggest surprise was Mr. Flaherty's commitment to cut the corporate income tax rate deeper than planned, from its current 22.1% to 15% in 2012, at a cost of $14-billion. The rate was set to drop to 18.5% by 2012."

    <b>A 15% Corporate Tax Rate????? There aren't words to express my anger.</b>

    In 1989, the House of Commons unanimously resolved to eliminate poverty among Canadian children by the year 2000. Last year, one million Canadian children, or nearly one in six, were still poor. Aboriginal people are disproportionately affected.

    Eighteen years after the 1989 all-party resolution of the House of Commons to end child poverty in Canada the rate is exactly the same, says a new report from Campaign 2000. Despite a growing economy, a soaring dollar and low unemployment, Statistics Canada data shows the after-tax child poverty rate is 11.7%, exactly where it was when all federal parties decided action was urgently needed.

    The 2007 National Report Card on Child and Family Poverty in Canada shows that 788,000 children live in poverty in Canada. A startling 41% of low-income children live in families with at least one parent working full-time all year yet do not earn enough to lift their families out of poverty. The risk of living in poverty is not the same for all children. Poverty hits children in racialized, First Nations and recent immigrant communities much more often.

    "The report is called It Takes a Nation to Raise a Generationbecause we are calling on the federal government to step up to the plate with a comprehensive Poverty Reduction Strategy," said Ann Decter, National Coordinator of Campaign 2000, releasing the document in Ottawa today. "The federal government has the fiscal resources if they donít give them away in general, across the board tax cuts." ... t2007.html

  4. Sat Apr 12, 2008 2:13 am
    Children, or workers are not "producers", so they don't deserve any favours.

    The only "producers" are the "investors", especially the "foreign direct investors" who badly need all the benefits so they can "create wore wealth".

    Ask any economist.

    Ed Deak.

  5. Sat Apr 12, 2008 3:23 pm
    There's another aspect nobody, especially no economists, or politicians, dare to talk about: Is buying on credit an economic benefit, or a liability?

    We all have to buy certain things on credit and this has been going on forever, but when, at what point and percentage, does credit become a killing factor on an economy?

    Buying things is supposed to be a trade, or an exchange of goods, or services. The purpose of money is to represent valuable assets for the purpose of real trade.

    But now, we have the free money creation powers of the banks and the whole world is flooded with non existing, worthless monies buying real goods. Is this still trade, or any form of real economy?

    Living in the boondocks, we have to have some credit cards, but hardly have anything on them and we pay them off right away. Yet, our credit limits are raised, as they are for hundreds of millions of people, every year, putting them into deeper and deeper debt. Hardly anybody has any savings, and when people are buying things on debt that doesn't represent real trade, but non existing, imaginary values, economists and politicians still account it as "sales" and "growth".

    Like I say, the biggest con game and racket in history.

    Ed Deak.

  6. Sat Apr 12, 2008 4:19 pm

  7. by RPW
    Sun Apr 13, 2008 10:06 pm
    Canada's "boom" (the operative word at any rate):

  8. Mon Apr 14, 2008 12:06 am
    One of the best examples that wealth can not be created, only taken.

    This kind of idiocy has been going on for a million years, yet humanity still hasn't learned the lessons, now university subjects for self destruction.

    Ed Deak.

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