Chapter 5 – Economic Indicators

Statistics Canada Reports a 3.4% Drop in Real GDP In 2008’s Fourth Quarter

http://www.reedconstructiondata.com/news/2009/03/statistics-canada-reports-a-34-drop-in-real-gdp-in-2008s-fourth-quarter/

Summary:
In the fourth quarter of 2008, “real” inflation adjusted GDP in Canada dropped 3.4% on an annualized basis in the latest measured period, according to Statistics Canada. This would be the poorest performance for Canadian GDP since the first quarter of 1991, where the change was -5.9%. The fact that personal consumer spending fell by 3.3% was the main contributing factor to the GDP decline. Also, the volume of imports dropped in Canada for two reasons; the weaker economy cut into buyers’ demands and the higher price of imports was an inhibiting factor.

Real GDP:
The Gross Domestic Product value is the level of economic activity in a country. In Canada, one way of measuring the level of economic activity would be to add up the total amount of spending during a calendar year. GDP is determined not only from households, but also businesses, government, and buyers from foreign countries (who buy our exports). Investments also affect the GDP value, businesses make purchases from other businesses for such things as machinery, equipment, and new buildings. Government spending and purchases contain goods and services as well, such as the purchase of a new fighter aircraft.

Reflection:
Referring to the economic situation as of now, consumer spending has certainly decreased, thus lowering the GDP. Inflation, the price raise of consumer products, causes households to reduce their spending and affects the economic balance causing other’s to do the same. Imports coming into Canada should also naturally drop because of the inflation and the prices of import to protect the value of the products in Canada. I believe that the statistics discussed were inevitable, probably the only solution is to use strategies like stimulus plans and government action. I find that even my own personal spending has been effected by the inflation and I am now more cautious of how I use my own money.