Three Worrying Economic Trends Beyond Canada’s GDP Drop
New data confirms what 79 per cent of Canadians already felt.
The much anticipated quarterly GDP numbers are out, and StatsCan confirmed what 79 per cent of Canadians already felt to be the case — Canada’s economy is in decline. A drop in economic activity of 0.1 per cent in the second quarter of 2015 officially tipped Canada in recession territory (after a drop of 0.2 per cent in the first quarter).
The dip in GDP is what’s making the headlines this week, but there are three other trends in the new data released by StatsCan that suggest the economic slowdown is here to stay. Indeed, as my colleague David Macdonald noted here, “recession is just the tip of Canada’s economic iceberg.”
1. Business investment is down for the third consecutive quarter
This decline comes on the heels of a long post-recession period of weak business investment since early 2012. You may remember the former governor of the Bank of Canada, Mark Carney, famously accusing companies of sitting on piles of“dead money” in the summer of 2012. A quick look at the statistics shows little has changed since.
Business investment in non-residential structures and machinery and equipment from 2010 to 2015, via StatsCan.
The problem is that without business investment, we can expect weaker job growth and a slower economy to continue.
The Bank of Canada cut its interest rate in January 2015 in an attempt to to encourage investment and boost the economy. Unfortunately, all this seems to have done is further distort real estate markets, particularly in places like Vancouver where housing affordability is reaching record lows.
2. A number of key economic sectors are in decline, not just oil and gas
Over the last decade, Canada’s economy has become overly reliant on mining and oil exports. It’s not surprising that when the price of oil and minerals drops sharply, as it has over the last year, our resource sector would be hit hard. But the economic decline extends beyond mining, oil and gas.
…click on the above link to read the rest of the article…
