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Canada economy slowed at end of 2018 raising recession fears
OTTAWA, March 2, 2019 (BSS/AFP) – Canada’s economy slowed in the last
three months of 2018 to only 0.4 percent, according to government data
released Friday, raising concern it is on the brink of a recession in an
election year.
The gross domestic product (GDP) figure was lower than the 1.0 percent
expected by analysts, following 2.0 percent growth in the previous quarter.
This slowing pace closed out the year with a total annualized economic
growth rate of 1.8 percent, slightly more than half the previous year’s 3.0
percent and the United States’s 2.9 percent growth in 2018.
“The ‘R’ word (for recession) will be on minds as Canada’s economy barely
skirted the start of a recession in Q4,” CIBC Capital Markets chief economist
Avery Shenfeld said in a research note.
He pointed to a “weak handoff” from December to the new year, that he said
will likely prompt the Bank of Canada to back off plans to raise interest
rates in the short term.
“If not for a huge employment gain in January (+67,000 jobs) we’d be
worried about an outright recession, but at this point, its best described as
a stalled engine,” Shenfeld concluded.
Either scenario is bad news for Prime Minister Justin Trudeau’s Liberals
as they head into elections in October looking to hold onto their
parliamentary majority.
The Trudeau Liberals’ popularity slipped amid allegations by his former
attorney general of political interference in the criminal prosecution of
engineering giant SNC-Lavalin.
The Montreal-based company was charged in 2015 with corruption for
allegedly bribing officials in Libya between 2001 and 2011 to secure
government contracts during former strongman Moamer Kadhafi’s reign.
For the first time, the ruling Liberal Party has found itself trailing the
opposition Conservatives led by Andrew Scheer in the most recent public
opinion polls.
Statistics Canada said the nation’s slowing economic growth mainly
reflected a drop in investment spending and lower exports.
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Household spending slowed for a second consecutive quarter, with spending
on life insurance and financial services up and on motor vehicles down.
Purchases of cannabis — after recreational use was legalized in October –
– totalled Can$5.9 billion (US$4.5 billion) or 0.5 percent of household
spending.
Business investment on non-residential structures, and machinery and
equipment fell sharply, but that plunge was moderated by an uptick in
investment in intellectual property products.
The latter was “mainly attributable to mineral exploration and evaluation,
which can be influenced by anticipated prices and potential new reserves,”
said Statistics Canada.
Exports volumes edged down, led by lower exports of forestry products,
building and packaging materials, metal and non-metallic minerals, and energy
products.
Imports also fell on lower shipments of industrial chemicals, plastic and
rubber products, motor vehicles and parts, and metal and non-metallic mineral
products.
Imports of energy products were flat while aircraft, engines and parts
rebounded a whopping 17.1 percent.
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