Canadian Mining and Manufacturing Stumble

April 30, 2012

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Statistics Canada reported today that the economy shrank in February, driven by declines in resource extraction and manufacturing.

Oil and gas extraction as well as hard-rock mining decreased due to temporary shutdowns. However, the most dramatic decline was in potash production, down 19% due to mine closures in Saskatchewan. The provincial government, which is budgeting a substantial increase in potash revenue for the coming fiscal year, must hope that this slowdown proves to be temporary.

Manufacturing had been a bright spot in the otherwise lacklustre economic news of recent months. There were signs of a nascent recovery driven by the auto sector. But in February, manufacturing declined by 1.2% after five consecutive monthly increases.

There was also a striking revision of previous data on durable-goods manufacturing. Last month’s release had indicated that durable goods expanded by 0.8% in January. This morning’s release changed that figure to a decline of 0.2% while also reporting a further decline of 0.9% in February.

The apparently positive trend in Canadian manufacturing is now in doubt. Weak manufacturing makes Canada’s economy even more dependent on inherently volatile extractive industries.

February’s drop in resource and manufacturing industries was cushioned to some extent by stability in the public sector. That may not be the case in future months as government austerity takes hold.

Erin Weir is an economist with the United Steelworkers union and a CCPA research associate.

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