Canada's GDP falls in November, worst since 2003

Canada's economy continued its slide in November as the country's economic output shrank by 0.7 per cent, according to figures released Friday.

Statistics Canada said slumping construction activity and an ailing manufacturing sector led an industrial race to the bottom in the month, the third one in four in which Canadian GDP contracted.

Canada's national output shrank by 0.1 per cent in October, offsetting a similar gain in September. 

In August, the Canadian economy slipped 0.5 per cent, an indication that a financial slowdown had already hit Canada prior to the credit meltdown that really began in September.

Goods-producing slowdown

The country's goods producers were particularly hard hit in the second last month of the year, said Canada's statistical agency.

"Activity in the manufacturing sector continued to decline in November (-2.1%), reaching a level of activity nearly 4% below that recorded in the first half of 2008," said Statistics Canada.

Employment among these industries had already fallen 32,000, or 1.6 per cent, compared December 2008 with the same month one year earlier.

Here, a rising Canadian currency in the first part of 2008 played havoc with the sector's ability to export products abroad.

Tools down

As well, building trades were down 1.2 per cent in November, an acceleration in the sector's downward slide as construction activity had decreased by 0.3 per cent in the previous month.

Home construction and renovation is one sector at which Finance Minister Jim Flaherty took aim in his budget on January 27.

In the budget, the government introduced a tax credit on home improvements that Ottawa hopes will boost work in the job-heavy construction sector.

Tough Q4

Economists were already geared up for a contraction in the country's fourth quarter, estimating GDP to slip 0.4 per cent.

November's decline was one of the worst in the decade, analysts said.

"This represented the largest monthly decline since August 2003 when a blackout in Ontario severely shut down economic activity in the province," said Paul Ferley, assistant chief economist, RBC Economics Research.

RBC is forecasting that Canada's GDP will shrink in the final three months of the year by 2.5 per cent, a change in direction compared to the previous quarter.

In the July-to-September period, Canada's economy grew by 1.3 per cent, the best performance among the four quarters of 2008.

But the appearance of a credit-induced recession in September virtually guaranteed that the Canadian economy was about to hit the same slippery slope as the United States.

For the year, Canada's GDP is expected to have barely moved the growth meter, increasing by 0.6 per cent.  By comparison, growth was 2.7 per cent in 2007, a period when Canada was already entering into an economic slowdown.