Manufacturing Slump Threatens Q2 Growth
Statistics Canada reported today, “Manufacturing sales fell 2.4% in April to $48.2 billion — the fourth decline in five months and the largest monthly percentage drop since August 2009.â€
That gets the second quarter off to a bad start. Strong economic growth in the first quarter of this year (January, February, March) was underpinned by the manufacturing sector’s swing into positive territory from a large decline in the fourth quarter of 2012. If manufacturing output falls back into decline, it could drag down the wider economy.
Unfortunately, weak manufacturing sales seem consistent with employment data. While the Labour Force Survey has been volatile in recent months, a consistent trend has been declining manufacturing employment. Canada has lost 99,000 manufacturing jobs over the past year, in addition to the half a million lost over the preceding decade.
UPDATE (June 16): Quoted by Canadian Press
http://krugman.blogs.nytimes.com/2013/06/15/worthwhile-canadian-comparison/
For sure the weakness in manufacturing is worrisome. Adding to that is what Krugman mentioned this week on Canadian household debt. The logic summed up, if you reduce the flow of debt, you could create a consumption problem and push the economy too far into contraction creating more pressure for deflation. The point I will make, just because debt is high does not necessitate a housing crash like the US experienced. High debt it in large part caused by these much Hogher mortgages, and potentially some liquidity siphoning from those paid down high mortgages. However, the bankers in Canada were much more sober in their lending practices, so much of those mortgages, if we believe the bankers did indeed stay sober, are quite sound. So just because we have higher priced mortgages and some liquidity drain from those mortgages, does not automatically necessitate or even predict housing crash. It is all in how that debt is managed ans secured. So just posting such charts like Krugman did, only tells half the story. The other half is related to the nature of the debt and lending practices. I do not like the insensitive fear mongering, we do not need it right now, we are in a delicate state. If he USA can keep its slow movement forward, we may actually get through this without a major crisis in housing. No affordable housing is a whole other kettle of fish, and sadly these nasty acceleration in the last decade are something we must bring to bear.
And hence, the manufacturing meltdown needs to stop! Which means the much appreciated dollar needs a reality check and corrective forces to bring it back to around 85 cents. We were getting there, at 95, but that oil price correlation keeps haunting us. Maybe things like fear mongering will bring the dollar down a bit. So if that is indeed the case then forget everything I just said! Summer is approaching so maybe it’s time to put the feet up and with the lemonade in hand try and relax. It is difficult to write these days with so much Neo con irrational ness pervading the policy circles. Anti union, anti public sector, anti progressive, it is quite pathetic really and morally bankrupting this nation.