Tuesday, 6 September 2011

Two Slow Growing Economies

Second quarter GDP data was recently released for Canada and the United States. Second quarter growth in both countries was slow. The modest surprise, especially given all of the talk about the weak U.S. economy was the slightly negative second quarter GDP growth rate for Canada. For Canada, second quarter GDP fell by 0.1% (or 0.4% on an annual basis) compared to the first quarter. This is not a very big number, but it is a negative number. This means that the Canadian economy is half way towards a recession. On the other hand, these numbers do get revised in the coming months and there is a chance that the revised second quarter GDP number will be positive. Consumption, business investment and government spending continued growing slowly between Q1 and Q2. The negative Q2 growth rate comes from imports out pacing exports. One thing is for certain. The recovery (if there ever was one) from the most recent recession has stalled.

In the charts below, Canadian growth rates are quarter over quarter, while US growth rates are annualized quarter over quarter.

1 comment:

  1. Chicago FED President Charles Evans told reporters that recent data “were quite definitive in showing the U.S. economy was not close to achieving launch velocity or getting growth up well above potential growth rates so we could make progress on the employment front.”
    There is great reluctance to admit that monetary policy is not the tool for the situation playing out in America, UK and Europe's periphery. Even if Canada does not go into a technical recession there should be (in my opinion) no expectation of BOC hikes over the next 15 months. From a Canadian perspective this will create further upward pressure on residential real estate prices absent a loss of consumer confidence that would create softness in housing prices.