Canada’s Economy Shrank

Canada’s economy contracted a less- than-anticipated 0.1 percent in October as wholesalers processed fewer shipments of automobiles and factory production dropped., 12/29/2008 8:06:40 AM

Wholesaling declined 2.7 percent as automotive sales slipped significantly” and manufacturing fell 0.7 percent, the third drop in five months, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg said gross domestic product would dip 0.3 percent, the median of 19 estimates.

The world’s eighth-biggest economy is slowing amid tight credit conditions for businesses, slumping shipments of cars and lumber to the U.S., Canada’s main foreign market, and lower prices for exported commodities such as oil. Gross domestic product will shrink by 0.4 percent next year and generate the country’s first budget deficit in more than a decade, Finance Minister Jim Flaherty said last week.

Flaherty, 58, is planning as much as C$25 billion ($20.6 billion) in stimulus in a budget he’ll release Jan. 27, a government official said last week on the condition they not be named. Slower revenue gains and higher spending threaten to end a record 11 straight budget surpluses for the oil-rich country.

Construction fell 0.3 percent as homebuilding retreated 1.2 percent. The drop in demand for housing also led to a 14 percent decline for real-estate agents and brokers.

Retailers’ output fell 0.1 percent in October.The financial services industry gained 0.4 percent after unusually high volumes” of stock trading, Statistics Canada said. Energy production also rose 1.2 percent in October after declining in the previous two months.

Overall, the goods-producing portion of the economy was unchanged while services industries shrank 0.2 percent. October’s decline left manufacturers contributing 5 percent less to GDP than in October 2007, the worst year-over-year performance among industries tracked by the agency.

Canada’s Economy Shrank