OTTAWA (Reuters) - Canada’s economic performance in the fourth quarter of 2008 was actually much worse than suggested by a 3.4 percent decline in gross domestic product, the parliamentary budget officer said on Wednesday.
“Canada’s fourth-quarter performance is weaker than these estimates suggest,” the budget officer, Kevin Page, said in a briefing paper.
Page said other relevant indicators of economic performance were real domestic income, which accounts for changes in domestic purchasing power, and nominal GDP, which serves as the broadest measure of the government’s tax base.
Both of those indicators showed much steeper declines in the final quarter of 2008, and Canada’s performance was significantly worse than that of the United States, the briefing paper said.
“As a small open economy and commodity net exporter, Canada’s economic performance is more dependent on foreign demand and commodity prices, which have both weakened significantly in the second half of 2008,” it said.
Page also criticized quarter-over-quarter comparisons of real GDP growth, saying comparing performance to year-earlier levels provides a better reflection of the real health of the economy. Seen in this way, Canada and the United States performed similarly, with a 0.7 percent decline and a 0.8 percent decline, respectively.
The quarterly decline in growth, at annualized rates, was 3.4 percent in Canada and 6.2 percent in the United States.
However, nominal GDP in Canada fell 13.4 percent quarter-on-quarter, versus a 5.8 percent decline in the United States. Compared with a year earlier, Canada’s fourth-quarter nominal GDP grew 1 percent, compared with 1.2 percent U.S. growth.
Lower prices for Canadian exports pushed real gross domestic income down by 15.3 percent in the final quarter of 2008, compared with just a 1.5 percent drop in the United States. Compared with the same period in 2007, real gross domestic income fell 2.1 percent, versus a decline of 0.7 percent in the United States, the briefing paper said.
Reporting by Louise Egan; Editing by Peter Galloway