GDP: The Road to Recovery?
Todayâ€™s Gross Domestic Product (GDP)Â release paints a significantly improved picture of the Canadian economy. GDP rose by 0.4% in November.
Statistics Canada also revised upward its previously released figures. GDP grew by 0.3% instead of 0.2% in October and 0.5% instead of 0.4% in September. While these figures are encouraging, they imply a slower annual growth rate than the 5.7% reported today by the U.S. Bureau of Economic Analysis for the fourth quarter.
Amount of Growth
Real GDP (in chained 2002 dollars) fell from a peak of $1,241 billion in July 2008 to a low of $1,185 billion in May 2009. Todayâ€™s figure is $1,201 billion for November 2009.
Canadaâ€™s economy fell into a deep hole and has climbed more than a quarter of the way out. After rising by $5 billion in November, annualized output is $16 billion above the bottom but still $40 billion below the top. If real GDP continued to expand by $5 billion per month, Canada would return to pre-crisis output in the third quarter of this year.
However, a return to pre-crisis output does not necessarily imply a return to pre-crisis unemployment. Given any productivity improvement, businesses will be able to produce the same amount of output with fewer workers.
Even a return to the same level of employment would not provide enough jobs to keep up with the continued growth of Canadaâ€™s population and potential workforce throughout the crisis. Job creation, as opposed to cutbacks, should be the focus of upcoming federal and provincial budgets.
Type of Growth
Novemberâ€™s growth was driven by natural-resource extraction and wholesale trade. The latter can be a barometer for the wider economy because it links production to retail and export markets.
One hopes that the rebound in wholesale trade presages a coming rebound in production. However, manufacturing output was completely flat in November.
Novemberâ€™s growth was uneven between industries. However, it looks more sustainable than Octoberâ€™s growth, which had been concentrated in utilities and real estate.