Canada’s Economy Stalls in April

By Dan Sumner, Economist, ATB Financial
The Canadian economy has been the golden child of developed nations during the last half year or so, but according to a Statistics Canada report released this morning, Canadian economic output stagnated in April. Following seven consecutive months of vey strong growth, Canadian gross domestic product (GDP) was unchanged in April 2010. GDP is a measurement of how much goods and services an economy produces, from the extraction of oil from Alberta’s oilsands to legal advice provided by a lawyer, the more stuff that an economy produces the richer a country is considered to be. After the 2008/09 recession, Canada’s GDP rebounded very strongly, driven partly by strong gains in consumer spending which propped up GDP in areas like retail sales and the housing market. However, recently consumers have stopped to catch their breath and this is weighing on Canada’s overall economic growth. Despite the stagnation in total Canadian GDP, output in Canada’s mining and oil and gas extraction sector, which is concentrated in Alberta, advanced by 0.5% in April. Statistics Canada noted that this was due to increased production of oil and oil services, while GDP from natural gas extraction shrank during the month. The weak reading on Canadian GDP rounds out a host of other indicators which all show that Canada’s economy stalled during the second quarter, including manufacturing shipments, retail sales and housing market indicators. Although Canada’s economy was largely expected to cool in the second half of the year it seems to be happening faster than many economists anticipated. While it is still far too early to say that the recent weakness is the beginning of a trend, economists will be closely watching these economic indictors moving forward.