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Surprise growth in Canadian economy

Nicole Halseth
News Editor | ote-news@unbc.ca

he Canadian economy

increased far more than
expected during the last three
months of 2013, growing at a
2.9% annual pace. Despite a
0.5% monthly contraction in
December 2013, largely due to the
devastating ice storm in central
Canada, the economy came
out much better than forecasts
predicted.

According to the Bank of Canada,
in the fourth and final financial
quarter of 2013, Canada’s
economy was only supposed to
grow at a rate of 2.5%. As such,
this marked the best financial
quarter Canada has seen in

over two years. It even outdoes
economic growth in the US, where
annualized economic growth was
dropped to 2.4% on 28 February
from the initially estimated 3.2%.
Additionally, this growth exceeds
the 2.7% seen in the third quarter
last year.

According to the Globe and Mail,
Statistics Canada claims this
increase is due to “oil-and-
gas and mining production,
manufacturing, household
consumption and higher
business inventories.” The
Canadian economy also saw
an increase in the public
sector, finance and
insurance, as well as
retail and wholesale

trade. However, declines were
seen in sectors like business
investment, construction, and
agriculture.

Economists across the country
have also cautioned against taking
these numbers as a unilateral
indicator that Canada’s economy
is flourishing, especially when

the details of this growth are
examined further.

Half of the growth can be
attributed to the building up of
inventories, while households
with major debt also contributed
significantly to the growth.

Scotiabank economists Derek Holt
and Dov Zigler said in a research
note that “There was little
breadth in the sources of growth.”
Additionally, chief economist for
the Bank of Montreal, Douglas
Porter, referred to the GDP report
as a “mixed bag.” He used the
already less promising GDP
record of 2014 as support for
this statement.

However,
Porter also
claimed
that

the Canadian economy “looks to
have had better momentum than
widely appreciated,” as early 2013
estimates for the fourth quarter
were much lower than the actual
growth recorded. As a whole,

the 2013 fiscal year saw a gross
domestic product expansion of 2%
annual rate. This was an increase
from the 1.7% rate in 2012.

Despite what the economy may be
doing on paper, other factors must
be considered when examining
the overall health of the Canadian
economy. For example, long-

term unemployment (at an
unchanged 7% from last year) and
involuntary part-time work levels
remain significantly elevated in
our labour market since the
recession. This has led to
increased underemployment.

According to the Globe
and Mail, “The
proportion of
people without
work for 27
weeks or
longer
has
risen

to 19 per cent of the total
unemployed, compared with a
share of 11.9 per cent in January,
2008.” The length of time an
individual remains unemployed
is also increasing. These factors,
combined with a large number of
other social indicators, show
that any reported growth in
the Canadian economy
must be met with
a degree of
skepticism.