XPost: can.ai, can.general, can.politics   
   From: abc@123.cl   
      
   Growth brought to you by: The government   
      
      
   By Alia McMullen,August 31, 2009   
      
      
   Canada’s government and central bank have achieved what they set out to   
   do: injected life back into the economy through stimulus, stoking   
   growth in June after 10 consecutive months of decline.   
      
   Canada’s government and central bank have achieved what they set out to   
   do: injected life back into the economy through stimulus, stoking   
   growth in June after 10 consecutive months of decline.   
   Photograph by: National Post, National Post   
      
   Canada’s government and central bank have achieved what they set out to   
   do: injected life back into the economy through stimulus, stoking   
   growth in June after 10 consecutive months of decline. The return to   
   growth may be a welcome change, but with the economy still heavily   
   dependent on its stimulus addiction, activity in the coming year will   
   remain shaky until the private sector can stand on its own two feet.   
      
   Economists, like Krishen Rangasamy from CIBC World Markets and   
   Sébastien Lavoie from Laurentian Bank Securities, said unemployment and   
   weak export demand would likely rattle the figures until the end of   
   2010 when the private sector will eventually begin to strengthen.   
      
   “[It] will take approximately twice the time for the Canadian economy   
   to fully recover from the contraction experienced between the fourth   
   quarter of 2008 and the second quarter of 2009.” Mr. Lavoie said.   
      
   Real gross domestic product increased by 0.1% in June, the first   
   monthly increase since July 2008, Statistics Canada figures showed   
   Monday. The rise signalled the economy had begun to improve as it   
   entered the third quarter, the period in which the Bank of Canada and   
   most economists predict the recession to have ended.   
      
   But the economy has a steep hole to climb out of. Real GDP contracted   
   by a worse-than-expected annualized rate of 3.4% in the second quarter,   
   while the decline in the first quarter was revised down to 6.1% from   
   5.4%, marking the worst quarterly performance on record.   
      
   Mr. Rangasamy said higher government spending and improved consumption   
   and residential investment offset declines in exports and business   
   investment in the month. All these sectors have benefited of late from   
   accommodative fiscal and monetary policy; residential investment has   
   picked up amid record low interest rates of 0.25%; consumption has been   
   underpinned by employment insurance benefits and government spending   
   has helped support sectors of the economy.   
      
   On a quarterly basis, government spending rose 5%, annualized, in the   
   second quarter, while government investment in buildings and   
   engineering projects increased 4.7% for an 11th consecutive quarter.   
      
   “Overall, efforts by the Bank of Canada and governments to mitigate the   
   size of the contraction did pay off in 09 Q2,” Mr. Lavoie said in a   
   note.   
      
   Ryan Brecht, and economist at Action Economics said the government was   
   responsible for 1.2% of total GDP in the quarter after adding 0.7% in   
   the first quarter. On the other hand, business investment fell 9.7% in   
   the period after a 28.1% plunge in the first three months of the year.   
      
   The stimulus has helped the service sector race well ahead of goods-   
   producing industries, which are still struggling heavily, noted Douglas   
   Porter at BMO Capital Markets. “It’s no news flash that goods   
   industries are weaker during a downturn, as they are naturally much   
   more cyclical,” Mr. Porter said. “However, the divergence in 2009 is   
   unheard of in the past 30 years.”   
      
   Mr. Rangasamy said GDP would likely rise about 3% in the third quarter   
   and remain firm in the fourth quarter because the economy would likely   
   benefit from the need to rebuild inventories both domestically and in   
   the United States. However, once these inventories were restocked, the   
   pace of growth would likely ease in the first half of next year,   
   especially with unemployment on the rise.   
      
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