A natural gas drilling well near Calgary in this 2007 photo© Todd Korol / Reuters
The November GDP number was worse than analysts expected, dropping 0.1 per cent. The prognosticators' consensus had called for a gain of 0.2 per cent. But they hadn't reckoned on a sharp drop in oil and natural gas production of 2.5 per cent.
Even leaving aside the energy sector, there is little in the latest soundings to console us in what is fast becoming a winter of economic discontent.
Construction, mining, utilities and wholesale trade all slid and financial services treaded water. One of the few bright spots was retail activity, which rose 0.6 per cent. Manufacturing also rose 0.6, but economists had expected more.
It should come as no surprise that the economy is slowing. Everyone from the Bank of Canada's Mark Carney and Finance Minister Jim Flaherty to the gaggle of economists paid to read the economic tea leaves has been telling us that we are not insulated from the troubles of recession-bound Europe, the snail-slow U.S. recovery and a slowdown in such key emerging markets as China and India.
As the latest GDP reading shows, we are also not immune to the warm winds of change blowing through the oil and gas sector. In the U.S., our most important export market, production climbed 1.3 per cent in November to 72.61 billion cubic feet/day. It's a trend that will continue, as more and more shale formations are exploited. Adding to the fracking factor, demand has been dropping in key markets all winter, courtesy of La Nina.
On the oil side, lower Canadian output was attributed to shutdowns for maintenance. But weaker markets will take a further toll in coming months. There is simply no shortage of the stuff.
All in all, we are looking at weaker than expected fourth-quarter growth and a downbeat first half this year, calling into question the wisdom of billions of dollars in spending cuts that the Conservatives are planning for the next federal budget.
Belt-tightening in the midst of an obvious slowdown can't help but make things worse for an already unsettled economy. Recession is not yet a risk, but the timing is wrong for a significant turn to the austerity road.