MRO Magazine

Canada’s economic slowdown coming to an end

Ottawa, ON -- Statistics Canada reported Nov. 16, 2006, that there are increasing signs that the recent slowdown in...


November 20, 2006
By MRO Magazine

Ottawa, ON — Statistics Canada reported Nov. 16, 2006, that there are increasing signs that the recent slowdown in the economy is, at least temporarily, coming to an end. Both gross domestic product (GDP) and employment posted back-to-back monthly gains after several months of little change, according to its latest survey of Current Economic Conditions.

Commodity prices rebounded in October, with metals setting new highs while energy firmed. This helped the stock market rally for the third time in four months, offsetting most of its losses in the spring.

The upturn in commodity and stock market prices did not prevent the exchange rate from easing slightly, providing some relief to the beleaguered manufacturing industry.

Wholesale and retail trade led the upturn in output over the summer. Some of the gains posted by these sectors may reflect a delay of purchases until after the cut in the GST, which would explain part of the weakness in demand in the spring and the subsequent rebound after July 1. Other sectors, notably mining, also rebounded sharply over the summer.


The housing market in Canada remained at a plateau near its recent highs. This was in marked contrast with the United States, where a fourth straight drop in housing was the major reason behind the slowdown in GDP growth in the third quarter.

Shortages of skilled and unskilled labour persisted in Western Canada, according to the October 2006 Business Conditions Survey. However, the real shift was in the Atlantic provinces, where nearly a quarter reported shortages of skilled labour and over 10% experienced a shortfall of unskilled labour. These were more than double the number a year earlier in the case of Prince Edward Island and Nova Scotia, and quadruple in Newfoundland and Labrador.

This shift reflects the outright drop in the population of the Atlantic provinces in the past year, as people moved to Western Canada. Moreover, labour force participation rates fell in three of the four Atlantic provinces (Newfoundland and Labrador was the exception).

House construction in Quebec also continued to slow. Together with a dip in non-residential building, this dampened shipments of capital goods. Wood and paper shipments also fell again in August, bringing their losses so far this year to 15% each. Still, the overall value of manufacturing shipments has risen almost 3% to date in 2006, driven by gains of over $250 million in both primary metals and petroleum refining.

Higher prices and substantial investments in aluminum and gasoline refining have doubled the share of these two industries in Quebec manufacturing from 13% in 1999 to 26% in August 2006. This offset a decline of 11 points in the share of the forestry and clothing-related sectors.