After Tough Winter, Canada’s Economy Shows Signs of Strength
(Bloomberg) -- The Canadian economy is starting to come around.
A report Friday from Statistics Canada showed April was the best month on record for job gains. A day earlier, the agency released figures showing long-suffering exporters finally had a good month in March, and there are signs consumers are still spending, even amid concerns over bloated debt loads and the overall outlook.
“So much for the soft Canadian economy,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said in a note to investors. “There was a spring in Canada’s step.”
The positive signals will be a relief to policy makers, who have been anticipating a rebound and waiting for the evidence to catch up. With an election five months away, Prime Minister Justin Trudeau wasted little time touting his Liberal government’s role in the booming labor market.
Yet, until this week, the labor market had been about only thing giving policy makers comfort. Analysts had warned as recently as last month that Canada ran the risk of falling into a recession amid a perfect storm of negativity -- falling oil prices, volatile financial markets, higher interest rates, cooling housing markets and global trade tensions.
Global trade tensions, meanwhile, curtailed business spending. To cap it off, the country’s colder-than-normal winter chilled everything from rail transportation to home building.
The recent slump saw the economy grow just 0.1 percent in the final three months of 2018. While gross domestic product data for the first quarter won’t be released until later this month, the Bank of Canada believes there wasn’t any improvement to start 2019. There have been few more sluggish back-to-back quarters.
But the outlook is turning around.
Oil is recovering, housing looks to be stabilizing and the nation’s indefatigable consumers are still spending. For example, Thursday’s trade data showed a sharp increase in imports of consumer goods, a possible sign of healthy domestic demand.
“The Canadian consumer is really alive and well here, considering how indebted they are,” Brett House, deputy chief economist at Scotiabank, said in a phone interview.
The surge in employment in April augurs well for more spending. Employment rose by 106,500 in April, Statistics Canada said, the biggest one-month increase in data going back to 1976. Canada has added 426,400 jobs over the past year and 700,000 jobs in two years.
That said, even if growth picks up in the coming quarters, no one expects a boom. The Bank of Canada sees growth maxing out at about 2 percent by next year, partly due to the constraints of high household debt levels. That’s a low rate of growth by historical standards, but much better than some had feared.
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