Statistics Canada reported today that the economy shrank in November for the first time in six months.
This decline was driven by reduced energy production, which partly reflected maintenance shutdowns in the oil patch and unusually mild weather. While those factors may not affect future economic growth, their ability to turn it negative in November underscores how much Canada’s economic recovery depended on just one industry. Our petro-economy is now vulnerable to any temporary drop in energy production.
A bright spot in today’s report is the pickup in durable-goods manufacturing. For a third consecutive month, manufacturing output accelerated.
It remains unclear whether this nascent manufacturing recovery will translate into jobs. Manufacturing employment decreased in all three of those months, but bounced back in December.
November was the third consecutive month in which Canada’s overall economic growth rate decreased. The revelation that we fell into negative territory should prompt governments to rethink planned budget cuts. Sharply reducing public investment could push our fragile economy back into recession.
Erin Weir is an economist with the United Steelworkers union and a CCPA research associate.
UPDATE (January 31): Interviewed on the Business News Network
UPDATE (February 1): Quoted by the Canadian Press