David Rosenberg: Canadian economy not so dead, after all

The Canadian economy, left for dead just a few short months ago, has come back again – if barely.

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Real GDP inched ahead at a 0.8 percent annual rate in the fourth quarter of 2015, and while the imploding energy sector had its thumbprints all over the place (especially in the continued retrenchment in total business spending) increases in consumer spending, housing and net exports provided an offset.

In fact, the first inventory withdrawal in years (in conjuction with the falloff in imports) was also a factor in depressing headline growth, and out of doors from the destocking, real growth came in in a not-too-shabby 2 percent annual rate that is double the amount pace recorded within the U.S. for Q4.

While we’re still coming off a brutal year in which real GDP growth slowed to 1.2 percent its 2015 – even with modest upward revisions to prior quarters – or about half what we should saw in 2014, the reason why this really is still not dubbed an economic downturn happens because real consumer spending in Q1 was +0.6 per cent at an annual rate, +1.9 per cent in Q2, +2.2 percent in Q3, and +1.0 percent in Q4.

These are hardly inspiring but be aware: every Canadian recession previously contained a minumum of one negative quarter of consumer spending. Not this time.

And as for residential construction: +5.9 percent in Q1, +1.3 percent in Q2, +2.7 percent in Q3 and +1.8 percent in Q4 – not one negative quarter here, either.

Funny that two-thirds of Canadian GDP escaped 2015 with out them negative quarter.

Related

Canada’s economy grows a lot more than expected, but that’s still not very muchWhy the Q4 GDP numbers could spell more stimulus for that Canadian economy

Business investment was weak and down 13 percent from the peak – this segment of the economy, indeed, has been in recession. So we were built with a 12 percent chunk of GDP in recession, true, but that does not whatsoever imply that the entire economy was at recession.



The C.D. Howe Institute may be the final arbiter, however this doesn’t look like the current recession everyone in Alberta and on Bay Street have been talking about incessantly for that better part of the past year.

We haven’t even come close yet to feeling all the lagged impact from the multi-year depreciation within the Canadian dollar, not to mention the large-scale Federal fiscal stimulus that is closer than you think – which alone will add the vast majority a portion indicate headline growth.

Is anyone prepared for Canada to emerge because the G7 GDP growth leader this year?

Yes, I’m specifically addressing the 38,090 net speculative short Canadian dollar futures and options positions overhanging the Chicago Mercantile Exchange in the moment.



The industry data were also encouraging, showing a 0.2 per cent month-over-month increase in December along with a 0.3 per cent advance in November.

In contrast to heading into Q4 of last year, Canada heads into Q1 of the year with some nice forward momentum – with out them month so far, the “build-in” is 1.0 percent at an annual rate and when our forecasts engage in, we’re able to maintain for any 2 per cent-to-2.5 per cent annualized pace for Q1 (in line with what the Atlanta Fed’s GDPNow tracking has become showing for that U.S. for that current quarter, so Canada is no longer lagging).

The Bank of Canada’s latest estimate for current quarter growth is 1.0 per cent – bearing in mind that this is happening prior even going to the fiscal boost, there seems little chance the central bank eases again (two more rate cuts are in the chamber), let alone starting any dangerous move toward a negative interest rate policy.

And inside a sign that the competitively supercharged Canadian dollar is playing a supporting role, the December data that reflected trade flows were highly constructive.

Manufacturing production jumped 1.1 per cent month-over-month and this followed a 0.3 percent output expansion in November, and that we enter Q1 having a 3.4 per cent annualized rate of growth about this score which would function as the fastest pace in nearly 2 yrs. Transportation and warehousing output rose 0.2 per cent along with a 0.9 percent bounce in November, and wholesale trade surged 1.8 per cent after a 1.0 percent November spike along with a 0.3 per cent rebound in October.

David Rosenberg is chief economist and strategist at Gluskin Sheff + Associates Inc. and author of the daily economic report, Breakfast with Dave. Follow David and his colleagues at twitter.com/gluskinsheffinc