Thursday, August 20, 2009

An Economy Divided

The global recession has literally divided Canada into two halves – stable economic sectors and slumping sectors.

Canada's service industry has been extremely resilient and has weathered the economic storm surprisingly well. Service industries including finance, insurance, health care, real estate and construction dropped approximately 1 per cent last winter but have since rebounded rather well. Employment in the services sector has been fairly stable as well. Although construction output and jobs had fallen at a somewhat greater rate than other services, these, too, have stabilized and are showing improvement. Sales of existing homes are showing record levels. The service sector's strength is attributed to its self reliance, rather than dependence on external global factors.

On the other hand, Canadian manufacturing is in desperate shape. Its dependence on foreign, rather than domestic, concerns may not portend well for Canadian manufacturers in the hear future. Key production concerns in Canada include base metal mining, aluminum production, and auto and aerospace manufacturing. As foreign buyers continue to reject Canadian made products including cars, planes, metals and other industrial products, shipments and sales have continued to slide to the lowest levels in the last decade. The lion's share of this decline has been felt in Canada's industrial heartland – Ontario and Quebec. Indeed, Canada's manufacturing numbers were far worse than figures released for U.S. industrial production. About 11 per cent of Canada's industrial workers – some 220,000 employees have lost their jobs due to the economic slump.

Despite early signs of global recovery, the strength of the Canadian dollar has made Canadian made products more expensive relative to foreign-produced products. Thus, foreign purchases are being directed to lower priced products.

The current trend in the manufacturing sector is not expected to show signs of improvement until well into 2010.

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