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Key economic indicators to watch in runup to election

Kevin Van Paassen/The Globe and Mail

Focus in the early days of the federal election campaign has been on everything but the Canadian economy. But the Conservative Party's record on such key bread-and-butter concerns as employment, economic growth, taxes and inflation will soon take centre stage.

The election comes at a time when the fragile global recovery - and by extension Canada's fortunes - looks shakier than at any point since the meltdown of late 2008 and early 2009. Japan is facing a long, painful recovery from devastating natural and nuclear disasters. Britain and a large swath of continental Europe have been forced to adopt tough austerity measures to cope with soaring deficits and financing costs, at a cost of sharply slowing economies. The Middle East and North Africa are in the midst of sweeping political and social unrest. China and other fast-growing emerging economies are tightening monetary policies to rein in inflation, which could have a profound effect on global demand for commodities. The United States will soon find out what the removal of massive government stimulus will mean for its economy.

Against this backdrop, the Conservatives will emphasize that their steady hand on the economic and fiscal tiller has kept the country on course to economic growth, an improved employment picture and to a fiscal position that remains the envy of its industrial partners. The opposition parties will focus on the weaknesses in all of these areas, and will be pressed to lay out their own visions for the country's future economic and fiscal direction.

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The economic statistics that will be released between now and voting day May 2 are sure to be seized on by all sides eager to make their case.

Here's a brief glance at what's coming:

GDP (March 31)

The monthly reading on the economy always grabs media and public attention. This week, we'll get our first look at January's performance, which kicks off the first quarter. "We will probably see a good number for GDP," said BMO Nesbitt Burns economist Benjamin Reitzes. How good? The bank forecasts a gain of 0.5 per cent, matching the healthy December level.

"Our call would put three-month annualized growth at 5.9 per cent, the best reading in a year, and suggests [first quarter]GDP growth could clock in at 4 per cent or better, assuming a decent February and March and barring any revisions to December's increase," he said. "That's well north of the Bank of Canada's latest projection of 2.5 per cent, which will no doubt be upgraded in April."

Definitely a plus for the Conservatives.

Unemployment (April 8)

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Always the single most important number for voters, even though the monthly figure is notoriously unreliable. The latest figures should show an increase of about 15,000 to 20,000 jobs, in line with current economic expansion, said CIBC World Markets chief economist Avery Shenfeld. Unemployment rose slightly and then stalled at 7.8 per cent for the past couple of months. "It would be helpful for the Conservatives if we managed to get a dip back down," Mr. Shenfeld said. The opposition would hope the number stays flat or rises, but is likely to be disappointed.

Still, the jobless rate remains well above its pre-crisis level of about 6 per cent and is only declining at a painfully slow pace, giving the Liberals and New Democrats some ammunition.

Bank of Canada (April 12 and 13)

The central bank will keep its key policy rate at 1 per cent, and will be careful not to signal what rate moves lie in store, given the optics of changing interest rates in the midst of an election campaign - a political no-no. "One reason why the BoC has been historically reticent to commence a tightening campaign during an election period relates to the uncertainty over the fiscal regime that will unfold during and after an election," Scotia Capital economists Derek Holt and Gorica Djeric said in a report. "Historically, that has been a very legitimate reason for monetary policy to shift to the sidelines in order to digest what transpires on the political scene and in terms of fiscal policy."

But the bank's monetary policy report, which lays out where conditions stand and where they are likely headed, will have to take account of the fact the economy is growing at a faster pace than it previously forecast. In fact, its forecast for the first quarter of 2.5 per cent growth is likely to be exceeded by as much as a full percentage point. That fact is likely to help the Conservatives, no matter how carefully bank governor Mark Carney treads.

Manufacturing (April 14)

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Canada's manufacturers have rebounded from the depths of the crisis, although sales are not back to pre-recession levels. It appears, too, that manufacturing has adjusted to the strong Canadian dollar, though economists believe that's still a threat. Still, in January sales by manufacturers surged 4.5 per cent, well above a forecast rate of 1 per cent, the best showing since October, 2008. This comes despite a strong dollar that hampers export sales.

Jayson Meyers, head of the Canadian Manufacturers & Exporters, is optimistic, but worries about the impact of global developments. "There's no doubt that, especially in the short-term, the crisis in Japan will have an effect on both the Canadian supply chain and in exports sales," he said earlier this month. "What worries me even more, though, is the impact all these various factors will have on the financial system. Take Libya, for example. You can't freeze $100-billion in assets and have no effect on the economy."

Inflation (April 19)

The March numbers will show a small increase in core inflation, largely because of comparison to levels the previous March, when prices fell after a spike in February related to the Olympic Games. But from a voter perspective, the only prices that matter are those they face every day in the marketplace, notably at gas stations and supermarkets. Opposition parties don't have to wait for the latest numbers to make higher gasoline and food costs a focus of their attacks on government policy.

Inflation itself remains low and contained. But try telling that to commuters facing much higher transportation costs and families coping with price increases for a host of staples.

Retail sales (April 21)

Most voters pay little attention to broad economic numbers, beyond GDP and employment. But another poor retail reading (after January's drop of 0.3 per cent) will drive home the point that plenty of consumers are stretched to the limit and unwilling or unable to borrow money to boost spending.

"Real consumer spending indexed to the start of 2007 for Canada compared to other major economies shows Canada as being unique in moving on to record highs through the crisis and following, while every other major economy was flat to down," said Scotia economists Derek Holt and Gorica Djeric.

That's not a sustainable pattern, given the state of consumer debt and job market prospects.

"The last two months of slowing momentum in retail spending confirms our view that given high household debt and a low savings rate, the Canadian consumer can no longer be the main engine for economic growth it once was," said economist Diana Petramala of Toronto-Dominion Bank.

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About the Author
Senior Economics Writer and Global Markets Columnist

Brian Milner is a senior economics writer and global markets columnist. In a long career at The Globe and Mail, he has covered diverse business beats, including international trade, the automotive industry, media, debt markets, banking and the business side of sports. More

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