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The 2008/2009 global recession was less severe and shorter in Canada than in the other G7 nations. From the third quarter of 2008 to the second quarter of 2009, real gross domestic product (GDP) in Canada fell by 3.3%. This compares with a decline of 3.8% in the United States during 2008/2009, and even larger declines in Europe and Japan.
Beginning of recovery
By the fourth quarter of 2009, GDP increased 1.2% in Canada—the largest quarterly advance since the third quarter of 2000.
A large pool of savings was available to finance spending when income fell temporarily. This reflects both healthier balance sheets built up during the 2003 to 2008 commodity boom and the strength of Canada's major financial institutions. The year 2009 was characterized by lower production in the first half, essentially no change in the summer, and then notable growth in the last four months. GDP fell 2.5% in 2009, as export volumes for goods and services dropped 14.2% and business investment volume in plant and equipment fell 19.9%. Since 1961, the only other annual GDP declines were in 1982 (2.9%) and 1991 (2.1%).
Goods production dropped for a second consecutive year, down 9.3%, whereas the production of services edged up 0.1%. All goods-producing sectors had lower production, especially manufacturing, mining, oil and gas extraction, and construction.
Final domestic demand declined 1.8%, largely because of the 19.9% drop in business investment in plant and equipment. Consumer spending edged up, as expenditures on services rose 1.1%. Consumer spending on durable and semi-durable goods, however, declined 1.5% and 2.2% respectively. Government current expenditure on goods and services rose 3.5%, and government capital spending increased 15.0%.
Non-farm inventories were reduced in 2009 following a large buildup in 2008. Labour income edged up 0.1% in 2009. A 42% increase in the receipt of Employment Insurance benefits contributed to personal income growth of 0.3%.
The personal saving rate increased from 3.6% in 2008 to 4.6% in 2009. The national saving rate, however, dropped from 12.1% to 4.1%, as saving in the corporate and government sectors declined.
The price of goods and services produced in Canada dropped 2.1% in 2009. Prices dropped significantly for gasoline, crude oil and natural gas. Final domestic demand prices rose 1.3%, with notable increases in the prices of food and industrial machinery.
The largest GDP declines occurred in the resource-intensive economies of Newfoundland and Labrador, Saskatchewan and Alberta. In 2009, manufacturing output declined in every province except Prince Edward Island.
National net worth
National net worth edged up 0.7% to $6.1 trillion in 2009, marking the lowest annual growth since 1990.
On a per capita basis, national net worth reached $180,900 in 2009, down from the peak of $181,800 in 2008.
The moderate advance in national wealth was partly offset by higher net foreign debt. Canada's net foreign debt increased as a result of the appreciating Canadian dollar and the ongoing current account deficit.
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