The Canadian economy grew at an annualized rate of 0.8 per cent in the fourth quarter, compared with 0.6 per cent growth for the U.S. economy, Statistics Canada reported Monday.
The latest figures on the economy will likely put more pressure on the Bank of Canada to cut interest rates by up to half a point Tuesday at the first rate-setting meeting headed by Mark Carney, the central bank's new governor.
In the United States, the U.S. Federal Reserve Board has cut rates by 1.25 percentage points in recent weeks, and could cut borrowing costs even more in the next few months to cushion the blow of an economy heading towards recession because of troubles in the housing industry and financial sector.
In Canada, economic growth slowed considerably as real gross domestic product _ the value of goods and services _ grew 0.2 per cent, down from 0.7 per cent in the third quarter, Statistics Canada said.
Economic output contracted 0.7 per cent in December alone. Moreover:
- Manufacturing activity tumbled 3.2 per cent during the last month of 2007 as 17 of the 21 major groups reported declines.
- Motor vehicle production dropped 27 per cent, the largest monthly decline since production cutbacks in January 1990.
- Wholesaling activities fell two per cent in December, largely due to the fall in the trade of automotive products, food and beverage products, and machinery and electronic equipment.
- The energy sector slipped 1.2; oil and gas extraction contracted 1.7, dragged down by a decrease in petroleum extraction, while electricity production fell 1.2.
- Industrial production (the output of mines, utilities and factories) dropped 2.4 per cent in December, as all three sectors declined.
Excluding motor vehicle and parts production, economic output contracted 0.4 per cent in December. Preliminary information for January indicates a partial rebound in motor vehicle production from its December level.
Exports recorded a 2.2 per cent decline in the fourth quarter. Meanwhile, strong growth in final domestic demand and an accumulation of wholesale and retail inventories drove imports up 2.6 per cent.
Consumer spending picked up in the fourth quarter of 2007, boosted by a 4.3 per cent jump in motor vehicle purchases, higher travel spending abroad and increased purchases of air transportation.
Business investment in machinery and equipment continued at a strong pace.
The output of the service industries expanded 0.7 per cent in the fourth quarter, while the goods-producing industries contracted 0.9 per cent.
Wholesale and retail trade, along with utilities, recorded the strongest growth.
The finance and insurance sector, construction, forestry, and accommodation and food services also contributed to the overall increase. These gains were partly offset by declines in manufacturing, mining and selected transportation industries.
Corporate profits were up 0.5 per cent, well short of the pace set in the previous three quarters. Labour income registered a strong fourth quarter. Employment and average earnings continued to grow in the quarter.
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Adam Affleck
Charlottetown Remax Realty
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