Canadian Economic Output Plunges Again
MONTREAL — HOUSING starts are up and so is the Toronto stock market, but the numbers say Canada's economy is still deep in a recession. Canadian output in the first quarter of 1991 dropped at a 6 percent annual rate. This was ``the worst so far of the recession and about equal to the largest quarterly drops in the 1981-82 recession,'' the government statistical agency reported May 31. It was the fourth consecutive quarterly drop in the economy since the recession began in 1990, the agency said.
``I think we'll see that the first quarter of this year will be the worst of the recession, the second quarter will be flat and we'll have growth by the third quarter,'' says Peter Drake, an economist with the Toronto Dominion Bank.
Manufacturing groups and labor unions are calling for a lower Canadian dollar (now worth 87.3 cents American, a recent high) and lower interest rates (now about 4 percentage points above those in the United States).
The federal government should lower the dollar and forget about fighting inflation ``because our major trading partner [the US] is not using the same policy,'' said Gerald Larose, president of the Confederation of National Trade Unions in Montreal.
Politicians are blaming each other, unions and business groups are blaming government polices, but analysts point out no one group is without blame. ``Its' always someone else's fault,'' Mr. Drake comments.
Analysts point out that Canadian productivity, that is, output per man-hour, increased only 80 percent as much as in the US from 1982 to 1989.
The good news is that Canada's slumping housing market has taken off. Sales jumped last month by 65 percent, the biggest rise since record-keeping began 35 years ago. The strongest housing markets were in British Columbia and Ontario.
The Toronto Stock Exchange - which accounts for 76 percent by value of shares traded in Canada - was up by 8.8 percent in the first five months of the year.
``Stock prices have turned around, predicting the recession will end,'' says Lamont Gordon, chairman of Sprott Securities Limited in Toronto. ``It is a classic turnaround situation with housing sales up, auto sales improved last month, and the stock market forecasting it all six months in advance. Things are getting better.''