March 18 2011 delayed public release of Oct 29th guidance to subscribers ~ The Trendlines Recession Indicator (NYSE:TRI) reveals Canada's economic activity is at the verge of negative growth ... albeit short-lived. Real GDP is estimated to have been 0.8% in October, down 1.2% in the previous month. Today, StatCan announced data inferring 1.3% August GDP.
Last November, the TRI was the first mainstream analysis to indicate the Recovery was exceeding 5% GDP growth rates. But within mere weeks, the Index began to already project its serious deterioration, and by December 23rd 2009, the TRI signaled the first alert of a potential double-dip. As North American news became worse, the date for a downturn was moved forward, but then in late April - all signs of future negative GDP vanished. TRI indicates GDP will be 2.1% in Q4 and projects 1.7% growth rate in 2011Q1.
This Summer's dismal activity represents a significant plunge from the heady 6.5% GDP days of one year ago. Because it flies in the face of six months of fiscal stimulus spending still to be distributed, we are confident the downturn reflects our March 5th warnings that Bank of Canada may have to ratchet back if it raised interest rates too quickly in light of a probable double-dip in the USA, an export killing near-par Loonie & an imminent winding down of Canada's Housing Bubble. Carney has since raised rates three times. Only nine months ago, the Central Bank & the Minister of Finance had assured Canadians that there is no realty bubble up here.
The factors contributing to Q4 weakness in the economy continue to be: (a) waning Fed/Prov fiscal stimulus cheques; (b) an assault on exports by a "par-plus" Loonie; (c) the consequences of deteriorating "wealth effect" associated with the ongoing correction of the $75,000 Canadian Housing Bubble. The home price national average has been plummeting by over $800/week since its May peak. GDP will resume its 2.7% norm, but medium term ramifications of these issues should prevent growth rates from surpassing the trend before the end of the current business cycle in 2017.