Canada's Economy Shrank 0.1% in August

Canada’s economy unexpectedly shrank in August, suggesting the economy may not have exited a recession in the third quarter after output was little changed in July., Bloomberg 10/30/2009 9:28:28 AM

Gross domestic product fell 0.1 percent in the month, as oil and gas extraction dropped 2.3 percent and manufacturing fell 0.7 percent, Statistics Canada said.

Bank of Canada Governor Mark Carney has said a recession ended in the July-September period after three quarters of contraction, predicting a 2 percent annualized expansion last week. The central bank plans to keep its benchmark rate at a record low 0.25 percent through June 2010 unless the inflation outlook shifts, and federal and provincial governments are tallying record budget deficits to boost demand.

Oil and gas extraction shrank as production slowed in eastern Canada, while manufacturing declined on drops in output of primary metals, machinery and paper, Statistics Canada said. Factory production has fallen 15 percent since August 2008.

Most of the sectors that showed gains in August are linked to government spending, tax cuts and interest-rate reductions. Public administration rose 0.6 percent, retailing rose 0.3 percent and construction rose 0.2 percent, the report said.

The country’s labor market and Statistics Canada’s leading economic indicator suggest the economy is rebounding. The jobless rate fell to 8.4 percent from 8.7 percent in September as employers added 30,600 staff, Statistics Canada said Oct. 9. The agency’s leading indicator index increased 1.1 percent in September, the fourth straight gain.