Recent economic performance

Gross Domestic Product

The Canadian economy has managed to grow without a recession for the past 15 years. While capacity has been stretched, few signs of cost push inflation have emerged. On a geographic basis, the west, with its vast mineral resources has outperformed the manufacturing reliant east. The Canadian economy, like that of its neighbor south of the border, is consumer based. Unlike the U.S., Canada releases GDP data only once a quarter, usually about two months after the reference quarter’s end. Third quarter gross domestic product was up 0.7 percent when compared with the previous quarter and 2.9 percent when compared with the same quarter a year ago.

Monthly gross domestic product

In addition to quarterly GDP data, Canada also releases monthly data for gross domestic product at basic prices. The data provide a monthly update on the economy’s performance and a check on the quarterly GDP data. In September monthly GDP was up 0.1 percent and 2.9 percent when compared with last year. Manufacturing, which has been a decided drag on the economy while services have flourished, managed a gain in September.

Inflation

There are several price indexes that can be used to sniff out inflationary trends if they exist. There are the consumer price index and its two major core measures, the industrial product price index and the raw material price index. The latter two measure producer inflation while the CPI measures inflation at the consumer level. Inflation has remained under control despite soaring energy prices and the strong Canadian currency.

While consumer prices have remained tame, producer prices have been all over the lot. Even using a year over year percent change, prices have only recently cooled from their torrid pace. It should be noted that producers for the most part were unable to pass along high raw material prices. Some of the raw material price increases were exacerbated by exchange rate volatility which feed back into these prices.

Unemployment — The Canadian unemployment rate at 5.8 percent is at its lowest since 1974 while the economy has continued to add jobs. In 2006, seven provinces hit record high employment rates while six reached 30-year record low unemployment rates. Alberta surged ahead in employment growth, charting its largest growth rate in 26 years at demand grew for its natural resources. For the first ten months of 2007, the economy has created 345,600 jobs — more than were created for all of 2006 while the unemployment rate continued to drop.

Merchandise trade — Canada consistently runs a trade surplus with the U.S. and on occasion, Japan but a deficit with all other trading partners. The trade surplus declined in 2006 primarily because of the relatively high value of the Canadian dollar against most other currencies, but especially against the U.S. dollar. The Canadian currency has been at its strongest since 1991-92.

The trade surplus has continued to shrink as the Canadian dollar gains in value. The currency has made Canadian exports cost more while at the same time, has made imports cheaper.