Economic Analysis
Unless otherwise stated all references to Gross Domestic Product (GDP) or Productivity is based on year to quarter data.
Canadian GDP And Productivity
Both Canadian GDP and Labor Productivity have decreased during the first quarter of 2018. Gross Domestic Product decreased to 2.6% on a year to quarter basis. The GDP for the last quarter of 2017 was 4.9%. Productivity decrease to -0.6%. In 2017, Canada's Gross Domestic Product grew by 3%.
In two of the last three first quarters, GDP was lower than the remaining three quarters. This has also been observed with the United States' GDP. With strong ties to the U.S., Canada may be no different.
Oil
For the Canadian economy, oil is a big contributor to both Gross Domestic Product and Productivity. Western Canada Select (WCS) recently fell below $40 per barrel, dropping to as low as $38 per barrel. That put it roughly $31 per barrel below WTI, the largest discount since 2013.
There is a sharp decline in WCS prices because of a shortage of pipeline capacity. Much of the talk about pipeline bottlenecks these days focuses on the Permian basin, and the unfolding slowdown in shale drilling. But Canada’s oil industry was contending with an inability to build new pipeline infrastructure for a long time. This will likely be resolved sometime in the future.
Housing is Still the Weakspot In The Canadian Economy
Housing is still the weakspot in the Canadian economy. This has the potential of bringing the entire economy down. I have mentioned this before, but it seems as nothing has been done in many Canadian cities. This will not end happily for Canada. The same situation has not ended happily for many other countries.
Raymond D. Matkowsky
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