Economic growth proves gloom a bit premature
Economists and business leaders have been down in the dumps about Canada’s outlook for a while, and apparently with good reason. The pace of economic growth in this country stumbled to a near halt in the final months of last year, and there was no obvious game-changer that would trigger a big improvement.
Except that a big improvement is exactly what we’re seeing in the latest economic report from Statistics Canada. Growth soared to a very healthy 2.5-per-cent rate in the first quarter of this year. That’s much faster than the Bank of Canada’s forecast of 1.5 per cent, faster than most private economic forecasters expected and even a bit faster than the U.S., which had been thought likely to outpace Canada handily this year.
It’s a little early to start popping Champagne corks, perhaps, but if exports continue to rise modestly after a big rebound in the first quarter, as many expect, they’ll add to economic growth this year after several years of subtracting heavily. Even with the housing market cooling, the economy should be on track for a decent year.
This is a handy reminder that, as StatsCan chief economic analyst Philip Cross used to remind journalists, any economic report can contain a surprising amount of just plain noise, so it doesn’t pay to get too excited over one or two disappointments. Cross, who now runs the research operation at the MacdonaldLaurier Institute, is still fascinated by how much we over interpret data.
Cross made the point Friday that as Canada’s economy has become more influenced by our big resource and construction sectors, it is quite logical that economic statistics would be more and more influenced by unpredictable events like weather and breakdowns of heavy equipment operated in hostile environments.
We saw wildfires and flooding shutdown much of Alberta oil production two years ago, and transport bottlenecks hampered it last year. Meanwhile, breakdowns in the complex machinery used in mining and oil projects sometimes make it hard to know how much resource production will contribute to growth. Cross believes that such factors might help explain the increasing frequency of wild lurches in our economic data.
And this is on top of the fair amount of uncertainty that was already in economic estimates. After all, does anyone really believe that Canada’s economy gained 13,000 jobs in April after losing 55,000 in March, gaining 51,000 in February and losing 22,000 in January?
And those lousy growth numbers from last year? Upon revision, it turns out that while growth was indeed weak in the fourth quarter, it was 50 per cent stronger, at 0.9 per cent, than originally reported.