Trick or treat?
The markets got all excited to see that the U.S. economy did not skid by as much as it might have in the third quarter of 2001. They should look at the numbers more closely. Beyond the cheerful costuming, the details were pretty scary. Then again, if you want to see something really ghoulish, maybe the thing to look at is the Canadian dollar.
(Okay, that's it for the Halloween references).
According to the Department of Commerce, U.S. gross domestic product dipped by 0.4 per cent at an annualized real rate in the third quarter of 2001. The decline in this broad measure of economic output is the sharpest since 1991. Given that the third quarter ends on Sept. 30, the number largely reflects the state of the United States prior to the events of Sept. 11. The economy inched up by 0.3 per cent in the second quarter.
Very little strength was apparent anywhere in the figures.
As expected business investment languished in the quarter. In the software and equipment sector, it was down by nearly 12 per cent, following a 15 per cent decline in the second quarter. U.S. consumer spending grew by a respectable 1.2 per cent in the quarter. Even so, that was helped along by government rebates to consumers. Had it not been for the federal cash (which came with the strong hint that the patriotic thing would be to spend, spend, spend), the consumer figures may well have been in negative territory. At any rate, the growth in spending was the weakest since 1993.
And let's not leave out exports. U.S. exports dipped by 16 per cent in the third quarter. That is a strong reminder that economic weakness is a global story. Canada, Japan, Europe-nobody is strong enough to offset U.S. weakness.
And speaking of Canada, let's look at what is happening on this side of the border.
First of all, we got better than expected Canadian data Wednesday. Canadian gross domestic product rose by 0.1 per cent in August. The market was expecting a dip of 0.1 per cent. Even so, the numbers were nowhere near good enough to stop anyone from selling the Canadian dollar.
Selling aggressively, actually. As at the time of writing, the loonie was trading at below 63 cents (U.S.). That is a record intra-day low. According to the Bank of Canada, the all-time low close on the loonie was 63.31. So whether it happens today or the next few days, it looks like we are headed towards a rather dubious record.
World uncertainty, low commodity prices, a recession for our largest trading partner, a central bank that waited too long to lower interest rates-choose your favourite reason the loonie is apparently not the currency of choice today. With the Canadian economy likely to follow the U.S. into negative territory soon (our own third quarter GDP figures come out the end of this month) we could set even more records.
Lots more economic data comes out this week. Friday we get employment figures from both sides of the border.
Stay tuned.
Linda Nazareth is ROBTv's resident economist.