Economy expands
You can expect Canada’s Conservative Party to make some hay on the campaign trail with the latest economic numbers, but it all may be not quite as it seems.
The country’s economy expanded 0.3 per cent in July, according to Statistics Canada today, marking the second straight month of growth after June’s revised showing of 0.4 per cent.
That leaves the contractions of the first two quarters well in the rear-view mirror, and no doubt is something the Conservatives wanted to hear, having been pummelled by the opposing Liberals and New Democratic Party over the issue of a flagging economy.
It’s not that today’s numbers are super strong, but they do show a turn of events in the wake of the hammering from the oil shock.
And it should stop talk of Canada being mired in recession, as the Liberals and NDP have said.
But as Charles St-Arnaud of Nomura Securities points out, there may well be a twist here.
“For sure, the talk of a recession should stop,” Mr. St-Arnaud said, pointing out that third-quarter growth is now on track to top 2 per cent, annualized.
“This removes one of the main criticisms the Liberals and NDP had regarding the Conservatives,” he added.
“It should be a positive for the Conservatives. But I wonder if it may also sway some voters into voting for one of the other two, as a reduction in the economic uncertainty may make them more willing to vote for change.”
Remember, too, that some economists also accuse the Conservative government of being tight with its money, when stimulus might have helped.
Indeed, the Bank of Canada thought the economy needed some juice, cutting interest rates twice this year.
Canadian bank economists tend not to wade into election waters, but they all note that the economy is clearly on the mend, projecting that the third quarter, which ends today, could well chalk up growth of between 2.5 per cent and 3 per cent.
“Overall, the release of July’s GDP provides further evidence that the worst of the Canadian economic soft patch is behind us and puts some upside to our view that real GDP growth clocked in at 2.5 per cent in the third quarter of the year,” said Toronto-Dominion Bank economist Diana Petramala.
A scene I'd love to see
“I’m going to work in the Canadian health care system.”
Quote of the day
“Our societies face a series of profound environmental and social challenges.”
Mark Carney
Carney warns on climate change
It’s not a central banker’s traditional fare, but Mark Carney is warning about the dangers of climate change.
“Climate change is the tragedy on the horizon,” the Bank of England governor, late of Canada, told a London dinner last night.
Mr. Carney, of course, put an economic bent on it, noting the inflation-adjusted insurance hits from weather-related events have surged to an annual average of $50-billion in the last 10 years from about $10-billion in the 1980s.
“We don’t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional of most actors - imposing a cost on future generations that the current generation has no direct incentive to fix.”
Chart of the day
Ontario capped fiscal 2014-15 with a narrower-than-expected deficit but higher net debt.
The deficit eased to $10.3-billion from almost $13-billion in the initial budget projection.
While revenue slipped, program spending fell faster and interest costs came in $375-million below expectations, noted senior economist Robert Kavcic of BMO Nesbitt Burns.
“All told, the fiscal year 2014-15 deficit weighed in at 1.4 per cent of GDP, similar to those seen over the prior two years, and net debt continued to climb to 39.5 per cent of GDP (the highest on record since the mid-80s),” Mr. Kavcic said.