Canada Staved Off 4th Quarter Contraction

With most economic indicators in for December, it appears that Canada’s economy experienced positive but modest growth in the 4th quarter.

Canada’s soaring trade balance kept Canada’s economy from shrinking as the Canadian consumer began to ease spending.

Overall, low interest rates supported continued new building in both the residential and private sectors.

As for the oil and gas industry, oil prices have remained steady since coming off of their early year highs, but natural gas prices have been so low that some producers are shutting down production altogether. More gas production shutdowns are likely so, this sector will probably be in a bit of a slump.

Depending on how exactly Canada’s economy wrapped up the year, Canada’s economy probably grew between 1.4 and 1.9 per cent at annualized rates in the fourth quarter (0.3 to 0.5 percent quarter-over-quarter). Overall Canada’s economy grew about 2.6 per cent in 2010- far more modest than the 3.6 per cent in 2010. Just under 3 per cent growth is good all things considered.  Canada faced a number of shocks through 2011 from environmental disasters. At home, forest fires in Alberta shut down oil production. The earthquake and tsunami in Japan and the flooding in Thailand had big impacts on the auto market. Production plummeted and prices shot up for a period of month. Despite a wild year in Europe, Canada’s trade actually soared with member nations.

Note: The odds of a contraction in December are exceedingly low based on my relatively simple model – much less than 5%.