March 2, 2009: The last of the G7 to report fourth quarter 2008 GDP, Statistics Canada, revealed that the Canadian economy contracted at a 3.4% annualized rate. The decline was broad-based, where imports (because they declined) and government were the only components to contribute positively to GDP; everything else in the Y = C + I + G + NX dragged GDP.
March 3, 2009: In a completely related action, the Bank of Canada is the latest global central bank to join the near-zero-bound club, when it cut its overnight rate by 50 bps to just 50 bps (0.5%). The monetary policy release indicates possible quantitative easing on the horizon (or if you are Bernanke, you would refer to this as credit easing, but who knows, perhaps Canada will actually target reserves):
Given the low level of the target for the overnight rate, the Bank is refining the approach it would take to provide additional monetary stimulus, if required, through credit and quantitative easing. In its April Monetary Policy Report, the Bank will outline a framework for the possible use of such measures.
Canada is officially sliding, and the BoC is worried....I would be, too, in an economy that is so dependent on U.S. demand.