Canadian GDP Slows In May

Canadian GDP slowed in May showing that the global slowdown emanating from Europe is affecting economies around the world. Canadian GDP grew 0.1 percent in May, less than economist expectations of a 0.2 percent gain. The annualized rate of growth came in at 2.2 percent year over year as compared to economist estimates of 2.4 percent annualized growth.

The Canadian economy is considered a leveraged play on U.S. growth as many of its exports (mainly energy) go to the U.S. Contrarily, the U.S. trades with nearly every major economy around the world and thus is more directly exposed to foreign economic shocks. The slowdown in Europe has caused a global slowdown witnessed in China and the U.S. Now, Canada is beginning to slow as U.S. growth slips below stall speed.

Of note in the GDP report was the drop in prices. The producer price index fell 0.3 percent in May on expectations of a 0.1 percent drop. Recall that in May, oil began a 20 percent drop with other commodities followed suit. A large portion of the Canadian economy is commodity exports, and so the drop in prices hurt the export sector. The drop in prices can also be seen in the raw material price index, which fell an astounding 4 percent in May on expectations of a 2.3 percent drop. Overall, the report was rather weak.

However, the GDP report is for May and the data is nearly two months old. More current data out of Canada has shown stabilization at weak levels of growth, a theme consistent with global economic indicators. This same thesis was echoed by Chinese Premier Wen Jiabao earlier Tuesday, who said that the Chinese economy was stabilizing at low levels. Fears of the European Debt Crisis morphing from a liquidity crisis to a solvency crisis has seen global trade volumes plummet. Chinese trade with Europe has fallen dramatically and has caused growth there to fall. Also, the Baltic Dry Index, a measure of demand for shipping, has fallen near the lowest level in years.

Despite the bleak outlook that this and other economic reports have been painting of the global economy, there may yet be some hope. Chinese Manufacturing PMI data is due out at 9:00 pm eastern time and could show that China's economy did in fact stabilize in July, as indicated by Mr. Wen. Other data that will help to clarify the economic portrait in the near future include U.S. data such as the ISM Manufacturing Index and the Non-Farm Payrolls report.

Posted In: NewsBondsCommoditiesForexGlobalEcon #sEconomicsIntraday UpdateMarketsCanadaChinaISMNon-Farm PayrollsWen Jiabao
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