The economy boomed back in the fourth quarter of last year, pushing well past expectations and raising the likelihood that the Bank of Canada will start to raise interest rates by summer.
Real gross domestic product grew at an annual rate of 5% in the fourth quarter, a full point above what analysts had expected and the largest quarterly increase in nearly a decade.
It outstripped the Bank of Canada’s forecast of 3.3% growth on an annual basis. The central bank has its next scheduled announcement on key lending rates on Tuesday but observers expect its overnight rate will remain where it is, at an all-time low of 0.25%.
The Bank of Canada and other central banks, particularly the U.S. Federal Reserve, have kept their key lending rates at, or near, the lowest levels possible in order to reduce the cost of borrowing and stimulate spending.
Canada’s economy grew by 1.2% in the fourth quarter, the largest jump since the third quarter of 2000, Statistics Canada reported.
Real GDP, a closely watched inflation-adjusted measure of economic performance, increased 0.6% in December alone, a fourth straight monthly advance.
Economist Douglas Porter of BMO said the data marked a clean break from the recession that began to be felt in Canada in October 2008.
The Bank of Canada essentially declared that the recession ended last summer -- a stance that was hotly debated in the months that followed, particularly because unemployment remained high and GDP increased minimally.
Kevin Page issued a Economic and Fiscal Assessment on November 2008. Report here
Kevin Page predicted a small deficit and laid out three options.
- Stay the course offer NO big spending increases.
- Auction off Crown assets or increase taxes or both to return to a balanced budget.
- Increase spending to stimulate the economy in the short term. The report says this could provide a buffer if a slowdown is expected to be "particularly severe," but would weaken the government's fiscal position in the short and long term.
Some of us disagreed with the third option in a massive stimulus budget suggesting it was NOT a conservative budget and betrayed the conservative principles. Some of us were concerned the significant increase of spending,speed would creat problems.
( December 2008 G8 and Canadian Premiers Advocated)
In March 2009 the Liberals allowed the largest budget to pass which was "Option 3" as proposed by the CPC led government. The only condition from the Liberals was to have the government provide quarterly reports. The NDP had already promised to vote it down before reading it, so in keeping their word the NDP did. The Bloc did not feel it had enough money for Quebec and also voted against the massive stimulus.
Most of 2009 we had the pleasure of watching the political parties create an industry of photo-ops, publicity stunts to attack each other without debating serious issues.
- Exit strategy Afghanistan Mission?
- Plans for Deficit Reduction, Balanced Budget for adopting "Option 3" in 2009?
As the Olympic Games ends, we are going to be witness to the political parties in Ottawa provide further evidence why Canadians in larger numbers continue to tune them out.