Canada’s economy shot ahead in November of last year, according to the latest report from Statistics Canada. In that month, Canada’s economy was 3.5 per cent larger than it was in November of 2016. The rebound in the energy sector was partially responsible.
The orange line in the graph below shows monthly gross domestic product (GDP) for all industries, as a percent change from the year-ago level. The blue line shows output in oil and gas extraction. While the data are for the entire Canadian economy, a large portion of oil and gas extraction originates in Alberta.
One of the most striking features of the graph is the volatility of oil and gas compared to the all-industries average. On a year-over-year percentage change basis, oil and gas activity has ranged from a decline of nearly 10 per cent to an increase of 23 per cent. Total Canadian GDP, on the other hand, has moved in a narrower range of -5 to +5 per cent.
The second thing one notices is the number of contractions in the energy sector compared to the total Canadian economy. Over the last 10 years, oil and gas output has dipped into negative territory at least eight times. The all-industries average, on the other hand, dropped below zero only once--during the 2008-09 global recession.
The third feature of the graph is the noticeable impact oil and gas has on Canada’s total economy. The major downswings in oil and gas pull down the all-industries GDP--something that is visually obvious as the orange line sags lower in 2008, 2012 and 2015.
|