In November, the Canadian economy grew only 0.2%. What’s behind the hiccup? Well, it didn’t come from the manufacturing sector, which demonstrated more strength than expected. Actually, energy losses shaved the most basis points off Canada’s annual growth rate.
More specifically, the energy sector came into the fold underperforming analysts’ expectations by 0.3%. This, in turn, sent the Canadian dollar lower, thus flattening our GDP from the previous month. In percentage terms, the energy sector’s output contracted about 2.5%.
In contrast, the manufacturing sector, which struggled the longest under the burden of a strong dollar and cutthroat international competition, finally posted gains. Surprisingly, automakers led the pack. Note, however, that November was only the second month last year that factories registered gains, so let’s not get used to this.
What I’m trying to say is that two months of gains in a weak sector and overall sluggish GDP performance only means that the economy will continue to be a shrinking violet among the G7.
The majority of analysts on Bay Street agree that we can expect a meager growth of 1.9% for the last quarter of 2006.
The light at the end of the tunnel seems to be offered by the labor market. Economists agree that robust job creation is bound to pick up the slack and pull the Canadian economy in the direction of recovery.
To give you just a snapshot regarding the rest of the board, Stats Canada reported that most goods and services sectors registered gains in November, including agriculture, forestry, construction and financial services. Utilities, however, lost about two percent on lower than expected demand for electricity from both residential and business consumers.
Among manufacturers, automakers posted an increase of 14% in November, along with drug manufacturers, furniture and finished metal products. On the other hand, textile and apparel manufacturers had the worst month on record in November.