Thursday, February 4th 2010

By Simon Granat

Remek Debski

Sil Analyst

January 26 to 29 was not exactly an exciting week in terms of economic releases for Canada—however there were some important numbers worth noting.

The month-over-month GDP numbers came in on Jan. 29. This meant good news for Canada. The numbers came in at a 0.4 per cent increase for November 2009. This was 0.1 points higher than analyst’s expectations, which made it the third consecutive monthly increase revealed by the Statistics Canada report. Of the ten sectors comprising GDP, seven contributed to the growth in November.

Major contributions were made by production in mining, oil, and gas sectors along with the wholesale sector – which accounted for nearly 60 per cent of the GDP growth. The declines came from the retail and utilities sector while manufacturing remained unchanged.

Though the month of October also saw an increase in overall GDP, there were changes worth noting sector by sector.

In October, both utility and retail sectors made major contributions to the GDP growth, but lagged in November which contributed to the decrease. Conversely, the mining, oil, and gas sectors alongside the finance and insurance sector had a positive impact on GDP in November whereas they lagged significantly in October.

Manufacturing has remained unchanged for the last two reporting sessions where as the wholesale sector and construction sector continue to grow steadily period-to-period.x

Friday was also an important day on the economic calendar for our neighbors to the south. The Bureau of Economic Analysis (BEA) came out with a monster quarter-over-quarter US GDP number. At 5.7 per cent growth, this number exceeded analyst expectations by 1.2 points.

Major contributors to these numbers were in private inventory investment exports, and personal consumption expenditures. The big gain was found in private inventory investment. This portion contributed 3.39 points to the total GDP number.

Economists believe that inventories should be stripped away to reveal the true GDP growth – in this case only being 2.01 per cent not 5.7 per cent. Private inventory investment only contributed 0.69 points to the 2.2 per cent growth in the previous quarter.

Therefore, by comparison, GDP only can only be shown to have gown 0.5 per cent over the previous quarter if private inventory investments are stripped away. This would reveal that the US economy is not expanding as quickly as some may believe.

Overall, the Canadian and US GDP announcements sent the loonie and the greenback into a trading frenzy. After several hours of back and forth, the already stronger US dollar gained in value versus the Canadian dollar.

Few major announcements are expected between February 1 and 5 in Canada, however some important numbers are expected to be released.

Most importantly, the morning of Feb. 5 will have traders waiting on the Labour Survey Report by Statistics Canada. The report will detail the state of employment in Canada. Analysts are predicting an increase of 15,000 jobs this period over the loss of 2,600 in the last. Unfortunately, there is an expectation that the unemployment rate will remain steady at 8.5 per cent.

It’s still safe to say that even though the Canadian economy is growing, job outlook is still looking bleak.