|Chart 1 (Source: Statistics Canada)|
|Chart 2 (Source: Statistics Canada)|
Honestly, there isn't much in these accounts to be optimistic about. That said, I still hold a glimmer of hope that business investment might be able to sustain economic activity for the next few quarters. Here are a few excerpts from the summary prepared by Statistics Canada:
Business investment in plant and equipment continued its upward trend, rising 3.7% in the second quarter, a sixth consecutive quarterly increase. Machinery and equipment has contributed the most to growth in overall investment in plant and equipment in four out of six quarters[....]
Government expenditures on goods and services grew 0.4%, after remaining unchanged in the first quarter. All levels of government increased spending on goods and services this quarter[...]Other than for the positive trend in business investment, it's clear that the second quarter of 2011 was a disappointment. This is definitely not the time to be cutting government expenditures. Instead, federal and provincial policymakers should be drawing up plans to inject additional stimulus into productive, job creating initiatives.
Consumer spending on goods and services rose 0.4% in the second quarter. Consumers increased their purchases of durable goods (+0.4%), as well as services (+0.8%). Purchases of non-durable goods edged down 0.1%, while purchases of semi-durable goods declined 0.8%.
As for Canada's exports, let's face it, there is little hope that these will increase significantly. The strength of the Canadian dollar combined with the weak economy of Canada's main trading partner, the United States, make that goal close to impossible to achieve. A repeat of Canada's export boom in the mid-1990s is highly unlikely (see here). Also, it's simply not a sensible approach right now to expect consumers to be the source of economic growth. As I've explained in previous posts (here and here), the household sector in Canada is currently in the process of accumulating less debt. And that is a good thing given that household and personal indebtedness are currently at worrisome levels.
Therefore, the best bet for policymakers right now would be to abandon plans to cut public expenditures and ensure that business investment continues to expand.
For more on how to achieve the goal of increasing business investment, please refer to my previous post entitled "The right way to balance the budget: target the corporate surplus, not the government deficit".