HEATHER SCOFFIELD
Globe and Mail Update
March 31, 2008 at 10:14 AM EDT
OTTAWA – Canada's economy bounced back in January after a contraction in
December, Statistics Canada said Monday, but details of its report
suggest most of the strength is within the domestic side of the economy,
while the external side is vulnerable to the U.S. slowdown.
"Domestic demand remains robust in Canada. External demand is the
albatross around the neck of the Canadian economy," said Stewart Hall,
market strategist for HSBC Canada.
Canada's real gross domestic product grew 0.6 per cent in January from a
month earlier, recovering from a 0.7 per cent contraction in December.
The expansion was almost in line with analysts' expectations of 0.5 per
cent growth.
The Canadian economy bounced back in January, growing 0.6 per cent from
a month earlier, and recovering from a dismal 0.7 per cent contraction
in December.
The Canadian economy bounced back in January, growing 0.6 per cent from
a month earlier, and recovering from a dismal 0.7 per cent contraction
in December.
Growth was "broadly based," the federal agency said, with manufacturing
and wholesale output leading the way. Overall, 16 of 21 categories in
the manufacturing sector expanded on the month.
Motor vehicle manufacturing expanded 12 per cent in January, after a 27
per cent decline in December, Statistics Canada said. Early data for
February suggest the auto sector recovery will persist, the agency
added.
Wholesale activity, led by food products, building materials and car
parts, surged 2.8 per cent in January, surpassing a peak set in
November.
The energy sector also expanded, growing 1.1 per cent in January as
petroleum and natural gas extraction grew by 1.4 per cent. Mining
output, however, dropped 5.4 per cent.
In the retail sector, which has been a driving force in the Canadian
economy, value-added rose 1.2 per cent because of busy activity in
clothing and furniture stores, Statistics Canada said.
Overall, eight out 10 sectors contributed to the monthly expansion,
while agriculture and forestry, as well as utilities, saw slight
declines.
But the January rebound doesn't mean Canada has suddenly become immune
to the U.S. slowdown, economists warned. Canada's growth has decelerated
for the past year, and is not about to stage a turnaround.
"The snap-back in January GDP shows that most of the steep drop in the
prior month was temporary, and clearly exaggerated the weakness in the
economy," BMO Nesbitt Burns' deputy economist Doug Porter said in a note
to clients. "Still, the underlying trend in growth is subdued at best,
with GDP up just 2.2 per cent in the past 12 months, and set to slow
further as the U.S. downturn deepens."
He pointed out the January rebound only partially made up for December's
contraction. In the huge auto production sector, the 27-per-cent decline
in December was only partly retraced with a 12-per-cent increase in
output in January. Likewise, manufacturing expanded 1.7 per cent in
January, but that's only half the decline seen in December.
The output of goods has declined 0.6 per cent from a year ago, while
services output has risen 3.6 per cent, underlining the division in the
Canadian economy between internal strength on the one hand, and
vulnerability to external forces on the other, Mr. Porter said.