OECD sees weaker growth for Canada

The Organization for Economic Development and Cooperation predicted weaker growth for Canada, based on its reading of leading indicators in January.
The OECD's latest analysis of leading indicators suggests weaker growth for Canada.

The Organization for Economic Development and Cooperation predicted weaker growth for Canada, based on its reading of leading indicators in January.

The OECD’s monthly index uses various data –including factory orders, inventory levels, and business confidence—to attempt to plot turning points in growth rates up to nine months ahead.

A reading of 100 would suggest a country’s growth is expected to exactly match the long-term trend from 1981 to 2012.

The index released Monday, projects the outlook for Canada’s growth slipping by a tenth of a percentage point from December to 99.5 in January.

Data released Friday showed Canada beat expectations for job creation in February, adding 51,000 new jobs, but in December, retail sales declined after five consecutive monthly gains and the inflation rate reached a three-year low.

On Friday, a group of about a dozen private sector economists told Finance Minister Jim Flaherty to expect more of the same in 2013 with real GDP growth of about 1.7 per cent.

CIBC senior economist Benjamin Tal says Canadians should get used to no longer being leader of the G7 pack in terms of growth.

"Canada is not leading anymore. Canada is entering this period in which we will underperform," he said, explaining that the main drivers of growth so far into the recovery — consumer spending and housing — have topped out.

The triangles mark confirmed turning points in the OECD index. (OECD)

For 39 major economies, the OECD predicts continued slow recovery, with an index level of 100.4, helped by firming growth in the U.S. and Japan.

That was up a tenth of a percentage point from December and its highest level in a year and a half.

Data released Friday showed the U.S. unemployment rate dropped to 7.7 per cent —a four-year low—in February, and that the American economy created 236,000 jobs.

The index also suggested a pickup in growth in the euro area by one tenth of a percentage point to 99.7, led by Germany, where the index rose to 99.6 to 99.2 a month earlier.

The outlook for China slipped to 99.0 from 99.1.

NDP finance critic Peggy Nash says the government should resume investing in the economy. She notes that while municipalities have been citing the infrastructure deficit in terms needed roads, bridges and public transit improvements, Ottawa is missing an opportunity to invest when interest rates are at historic lows.

"Obviously people expect us to be prudent with tax dollars, but ... we'll never find a better time and a better price to leverage federal dollars for things like infrastructure," she said.

"Not only is lack of infrastructure hurting the economy now, but why make these investments (later) when interest rates are higher and it costs you more money?"

Flaherty told reporters last week not to expect significant new spending in the upcoming budget, expected on March 26, adding that his focus remains on balancing the budget in 2015-16. For that, he may need to trim spending and close tax loopholes, he said.

The economists who advised the minister agreed the economy is not sufficiently weak to require more stimulus, although at least one said Flaherty should be careful not to cut too deeply.

With files from The Canadian Press