|Chart 1: Gross Domestic Product and demand, Canada, Source: Statistics Canada|
The current slowdown in domestic demand should come as no surprise. Cutting public sector expenditures in the face of weakening consumer spending and dwindling growth in business investment is hardly a sensible approach to economic policy-making (see chart 2). And it would be a recipe for disaster for nations that, unlike Canada, cannot count on external demand to potentially fill the gap created by public sector expenditure cuts.
|Chart 2: Components of final domestic demand, Source: Statistics Canada|