Trudeau defends his economic track record as new data shows GDP contracted last quarter
'We know that Canadians are facing challenging times,' prime minister says after weak data is reported
Prime Minister Justin Trudeau defended his government's economic performance Thursday by touting investments in housing and dental care when asked about new data that shows the economy actually contracted in the last quarter.
Statistics Canada reported this morning that the Canadian economy shrank at an annualized pace of 1.1 per cent in the third quarter — a performance much worse than what some forecasters expected for the July through September period.
In October, the Bank of Canada forecast that the economy would actually grow by roughly 0.8 per cent in that quarter.
Finance Minister Chrystia Freeland's fall economic statement, tabled last week, cited a September survey of private sector economists projecting the economy would grow at least a little in the third quarter. The weak economic performance could undermine that document's fiscal projections.
The new StatsCan data suggests the economy is underperforming even the relatively pessimistic growth projections from the central bank and others.
The slump was driven in part by reduced exports, including a steep decline in refined petroleum energy products, StatsCan said.
The U.S. GDP grew by 5.2 per cent in the same period.
Conservative Leader Pierre Poilievre pounced on the poor data, saying Trudeau has "led the economy into a ditch."
The negative economic growth comes after the Bank of Canada went on an aggressive rate-hiking campaign to drive down red-hot inflation.
The intended effect of this effort — an economic slowdown to restore price stability — appears to be panning out.
"We know that Canadians are facing challenging times and have for a long stretch now," Trudeau said.
"That's why we've been stepping up with direct supports for Canadians," he said, citing past GST rebates and rental relief for low-income Canadians.
Trudeau said Ottawa would push ahead with a housing accelerator fund, a program that floats money to cities that cut building-related red tape to get more units built.
He said the government would come through with more low-cost loans for homebuilders to get affordable rental homes built to help deal with the country's acute housing crunch.
He also said the federal dental care program for children, and a forthcoming expansion of rhe program for eligible seniors, will save families money when every extra dollar counts.
Trudeau claimed that Ottawa is managing its finances in "a fiscally responsible way" and the federal government could come through with more relief for Canadians if the economy slips into a recession and unemployment rates move higher.
"We have room to respond if there is more to do," Trudeau said.
"We have the lowest deficit in the G7, the best debt-to-GDP ratio in the G7."
He accused Poilievre of planning to quickly eliminate the federal deficit through harmful cuts to public services. "Conservatives propose cuts in services and programs as a way of creating growth, which makes absolutely no sense," Trudeau said.
Poilievre warns of 'stagflation' risk
While Canada's debt servicing costs are lower than those faced by some other countries, Freeland's fall economic statement warns that they are expected to balloon.
With interest rates at a 20-year high, the cost to borrow to carry the federal government's $1.2-trillion debt has spiked from $20.3 billion in 2020-21 to $46.5 billion in this fiscal year.
Poilievre said Canada could be facing "stagflation" — high inflation combined with high unemployment and slack demand for goods and services.
The inflation rate has levelled off in recent months and the country's unemployment rate is still relatively low at 5.7 per cent.
And while the third quarter GDP figure was a big miss, Statistics Canada did revise up its numbers for the second quarter.
The statisticians at the federal agency now say the economy grew by 1.4 per cent in the April-June period, higher than the figure they previously reported.
But Poilievre said Canada's record just doesn't compare to what's transpired in the U.S.
"Why is it that the American economy is roaring while the prime minister's economy is snoring?" Poilievre said in question period.
Treasury Board President Anita Anand said the International Monetary Fund (IMF) projects that Canada will have the highest economic growth in the G7 next year.
Rachel Bendayan, the parliamentary secretary to the minister of Finance, said the Conservatives are "talking down" the economy while the Liberals are focused on their economic plan, which includes delivering more homes and boosting climate-friendly industries.
Industry Minister Francois-Philippe Champagne also responded to Conservative criticism by touting a recent multi-billion dollar investment by Dow, a U.S. chemical company, in Fort Saskatchewan, Alta.
"There's one number the Conservatives never mentioned. We're third for foreign direct investment," Champagne said. "This is how you lead a country. This is how you lead an economy."
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