Canada GDP Declines .3%, Largest Drop in Two Years - Don't Worry It's "Temporary"; Canadian Apologists Be Warned

Lost in the US deficit battles and the pathetic US GDP statistics comes yet another surprise: Canada’s Economy Shrank 0.3% in May Posting the Largest Drop in Two Years

Canada’s gross domestic product fell in May by the most in two years due to temporary disruptions in the mining and oil and gas sector, government data showed.

Output fell 0.3 percent in May to C$1.26 trillion ($1.32 trillion) on a seasonally adjusted basis, after being little changed in April and gaining 0.3 percent in March, Statistics Canada said today in Ottawa. Economists in a Bloomberg survey forecast the economy would grow 0.1 percent, based on the median of 24 responses.

The Bank of Canada said July 20 the economy’s growth probably slowed to 1.5 percent in the second quarter of this year, its slowest pace since the country emerged from recession in 2009, because of “supply disruptions” related to the earthquake and tsunami in Japan, slowing government spending and the impact of higher food and energy prices. Governor Mark Carney has kept the central bank’s benchmark policy rate at 1 percent since September.

“The weakness is slightly over-stated” in May because of temporary factors, said David Tulk, chief Canada macro strategist at TD Securities, though the numbers highlight how expansion in the second quarter has been a “lost cause.”

Canadian Apologists Be Warned

Canadian apologists say weakness is overstated and temporary. I say it's understated because few realize what is happening and how serious this is.

Global stimulus has faded. It's gone. Kaput. And that stimulus was the only thing holding this global economy together.

Strip out government spending, QE madness in the US, and unsustainable credit growth in China and you have a flatline global economy at best.

It's Not Temporary

Headline be damned, it's not temporary.

Europe is now in austerity-mode, US cities and states are cutting back, the odds of more fiscal stimulus in the US are roughly zero, the US might (and should) lose its AAA rating, Australia is a basket case on the bursting of its property bubble, Canada has the second or third largest property bubble next to China and Australia, the bond market is targeting Italy and Spain, Brazilian defaults are soaring, China is overheating and needs to slow, yet the average economist is looking for a robust second-half. Go figure.

In aggregate, economists are the most optimistic group on the planet.

For a look at the US GDP situation, please consider US GDP on Verge of Contraction in 1st Quarter, Mere 1.3% Annual Rate 2nd Quarter; Summary of Massive Revisions; Second-Half Recovery Nonsense

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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