Drop in exports contributes to slowing economy

OTTAWA — Canada’s economic growth slowed considerably in the fourth quarter of 2007 as real gross domestic product (GDP) grew 0.2 percent, down from 0.7 percent in the third quarter.

According to Statistics Canada, exports recorded a significant 2.2 percent decline in the fourth quarter, in the wake of a rising Canadian dollar and extended holiday shutdowns in several motor vehicle manufacturing facilities.

The drop in exports was the first decline in six quarters, as Canada’s international trade balance continued to deteriorate in the fourth quarter. The decline was spurred by a 2.7 percent decrease in international shipments of goods. Merchandise exports had averaged growth of 0.5 percent over the previous three quarters.

The drop in the export of goods was widespread. Exports of machinery and equipment as well as automotive products continued to be weak, falling 3.4 percent and 1.7 percent respectively. Industrial goods and materials also declined, following two consecutive quarters of growth.

Source: Statistics Canada

Manufacturing activity tumbled 3.2 percent in December, reaching its lowest level since December 2001. Motor vehicle production dropped 27 percent, the largest monthly decline since production cutbacks in January 1990 caused a 37 percent reduction in activity. The major drop in motor vehicle production in December was primarily due to extended holiday shutdowns related to inventory control and retooling for new models.

Declines in the manufacturing sector were widespread, with 17 of the 21 major groups decreasing. Both the manufacturing of durable and non-durable goods fell. Other notable drops were recorded in wood products, machinery, and non-metallic mineral product manufacturing.

The Canadian economy grew at an annualized rate of 0.8 percent in the fourth quarter, compared with 0.6 percent growth for the U.S. economy.

Real GDP grew 2.7 percent in 2007, a slight deceleration from 2006. The growth rate for 2007 matches the average growth of the past five years. The economy slowed over the course of 2007 with the lowest growth recorded in the fourth quarter.

The year was marked by a further large appreciation of the Canadian dollar with respect to the U.S. currency. Imports surged ahead while exports edged up at a pace similar to 2006.

A more detailed analysis is available in the Canadian Economic Accounts Quarterly Review.

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