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TD Economics
Commentary
January 30, 2009

IT’S RECESSION TIME

• Canadian real GDP growth contracted by 0.7% REAL GDP AT BASIC PRICES - CANADA
in November November-08
• GDP growth is now expected to contract in the Level* % Chg. % Chg.
2.5% to 3.0% range in the fourth quarter (Billions) M/M Y/Y
All INDUSTRIES 1220.6 -0.7 -0.8
The Canadian economy has given in to international GOODS INDUSTRIES 358.7 -1.3 -3.8
economic pressures surrounding it, and is now showing Manufacturing 171.5 -2.1 -7.0
Mining, oil & gas extraction 55.3 -0.5 -2.0
clear signs of a recession. A 0.7% GDP contraction in Construction 73.6 -1.2 0.1
November was much worse than the 0.4% expected by Utilities 30.6 -1.1 -4.8
markets, but in line with TD Economics’ expectations. This SERVICE INDUSTRIES 864.5 -0.4 0.7
Wholesale trade 67.2 -3.1 -7.7
is the largest decline since August of 2003, and we have
Retail trade 74.9 -0.5 1.3
now seen the Canadian economy basically contract for Transport. & warehousing 56.4 -0.7 -1.4
the last four months, with the level of economic activity Finance, Insurance, Real Estate 247.4 -0.3 1.4
below what it was in June of 2007. Education Services 61.1 -0.1 2.5
* 2002 Chained Prices; Source: Statistics Canada / Haver Analytics.
The weakness was broad based with all but three in-
dustries posting cut backs in production. With slumping
foreign and domestic demand the largest losses were in food will be able to withstand the headwinds of a global
manufacturing and wholesale trade, with production re- recession.
treating by a whopping 2.1% and 3.1% respectively. Re- The slate of bad economic news this month has led us
lated to the quick deterioration in the housing market, the to revise down our fourth quarter real GDP contraction
other two big drags on the economy were construction estimate from 1.6% to a range of 2.5% to 3.0%. As things
and real estate where activity fell sharply by 1.2% and are going, without taking the recent government stimulus
0.3% respectively. Most other sectors disappointed as package into consideration, the Canadian economy in 2009
excluding these four industries, GDP growth still contracted was headed for an economic downturn almost as severe
by 0.2% in November. On the upside, the three gainers as the 1990’s recession. However, government support in
were agriculture (0.2%), accommodation and food serv- terms of credit easing, infrastructure spending, and tax
ices (0.3%), and health care and social assistance (0.4%). breaks will help curb what could have been a 2.0% con-
The latter component tends to be less responsive to the traction in 2009, to a more likely 1.4% retreat, thus putting
economic cycle, while we doubt that accommodation and a floor under the economy.

Diana Petramala, Economist

For further information, contact Beata Caranci at 416-982-8067.

TD Economics Commentary January 30, 2009

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TD Economics Commentary January 30, 2009