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Baraka_Guru · 09-03-2009, 07:47 PM

This is a good sign. Take it with a grain of salt, and this will likely be a long climb out of the hole....but it's a good sign, no?

Quote:

Canada's economic growth offers hope

Deborah Baic/The Globe and Mail

GDP increased 0.1 per cent in June from May, the first rise in 11 months

Kevin Carmichael

Monday, Aug. 31, 2009 08:40AM EDT

Canada's economy grew for the first time in 11 months in June, providing a glimmer of hope at the end of a period that still marked the country's third consecutive quarter of economic contraction.

Gross Domestic Product increased 0.1 per cent in June from May, led by drillers of oil and gas, wholesalers and real estate agents, Statistics Canada reported Monday.

Over the second quarter as a whole, GDP shrank at an annual rate of 3.4 per cent, compared with a contraction of 6.1 per cent in the first three months of the year, as exporters continued to struggle to find markets amid the deepest global downturn since the Second World War.

Statscan's latest GDP figures reinforce the Bank of Canada's outlook. The central bank, led by Governor Mark Carney, predicted last month that Canada's first recession since 1992 would end this quarter and begin a long, slow climb out of the hole created by the financial crisis.

The Bank of Canada predicted that GDP would contract at an annual rate of 3.5 per cent in the second quarter and expand at a rate of 1.3 per cent in the third quarter. Mr. Carney said it will be at least a year before the economy is expanding at a pace that would cause him to worry about inflation because so much production capacity has been idled by the recession.

The central bank doesn't forecast monthly GDP, which Statscan calculates slightly differently than it does the three-month figure. The two numbers are close enough that economists use the monthly data as a guide to the more commonly used quarterly readings.

Statscan's calculation of a 6.1-per-cent rate of contraction in January through March was revised from an original estimate of 5.4 per cent, making the first quarter the weakest on record, according to Statscan data that dates back to 1961.

“The Canadian recession appears to have been deeper than initially thought, but June's monthly real GDP number does suggest that the recession did finally end in June,” Meny Grauman, an economist at CIBC World Markets in Toronto, observed in a note to clients.

Buoyed by rising commodity prices, the oil and gas extraction industry increased output by 1.3 per cent in June, easing the overall decline in the goods-producing industries to 0.6 per cent from a 1.6-per-cent drop in May.

Wholesale trade also increased 1.3 per cent in June. All service-producing industries, which make the greatest contribution to GDP, gained 0.4 per cent after generating no growth in May.

The second-quarter numbers back up the prevailing view in financial markets and among policy makers that the recession bottomed in the spring.

Exports of goods and services, which represent more than a third of Canada's $1.3-trillion GDP, dropped 5.2 per cent in the second quarter after plunging 8.7 per cent in the first three months of 2009.

With early signs of recovery in the United States and a burst of government-fuelled spending in China and other Asian countries this summer, the Bank of Canada and many economists expect Canada's trade prospects to pick up over the rest of the year.

That would dovetail with domestic demand that has held up surprisingly well during the recession, which first showed up in quarterly GDP figures at the end of last year.

Consumer spending, which equals more than 60 per cent of Canada's economy, rose 0.4 per cent in the second quarter after falling 0.3 per cent in the January-March period.

But much of that spending is related to the extraordinary efforts of Finance Minister Jim Flaherty and Mr. Carney to stimulate spending.

Residential investment increased 1.7 per cent in the second quarter, the first increase in more than a year, reflecting Mr. Flaherty's decision to enrich the government's subsidy for first-time home buyers and Mr. Carney's decision to drop borrowing costs to a record low.

Both Mr. Flaherty and Mr. Carney have warned that the rebound is fragile because it is almost entirely the result of stimulus measures. Government spending rose 0.8 per cent in the second quarter and a jump in personal income was led by a 23-per-cent increase in unemployment benefits, Statscan said.

“The Bank of Canada will likely be encouraged by indications that the economy is starting to pull out of recession and recent reports support the Bank's view that the economy will return to positive growth in the third quarter,” Dawn Desjardins, assistant chief economist at RBC Dominion Securities, said in a report. “However, to assure that this profile is realized, the Bank of Canada will likely keep monetary conditions very accommodative maintaining the overnight rate at the current 0.25 per cent.”