Economy: Sluggish growth in real GDP

Real gross domestic product (GDP) fell 0.1% in November. The unexpected decline, on top of a flat October, has convinced many economists that the Canadian economy is slowing sooner than anticipated, indicating continued shepherding of your personal wealth.

"If GDP manages to rise 0.2% in December,î writes Doug Porter, deputy chief economist at Bank of Montreal, in a report, "and that's no sure thing after back‐to‐back disappointments, growth will come in a touch below 1.5% in the fourth quarter, compared with the Bank of Canada's latest estimate of 2.0%.î

According to Statistics Canada, reduced output in the energy sector was behind the November decline. Oil and gas extraction dropped 2.5% in the month, partially the result of maintenance shutdowns. Decreased drilling activity made for a 3.8% drop in support activities for oil and gas extraction.

Certainly, as Porter notes, most of the downside was concentrated in that one category, but no other sector "stepped upî to provide any offset. For the third consecutive month, manufacturing output did increase ó but only by 0.6%.

"Expectations of an increase in overall GDP in November were largely based on earlier indications of a sharp 1.7% rise in the volume of manufacturing sales in the month,î reports Paul Ferley, assistant chief economist at Royal Bank of Canada.

Manufacturing growth was mainly in the production of durable goods such as machinery and motor vehicles (+0.9%) vs. non-durable goods (+0.1%). According to StatsCan, fabricated metal products, furniture and related products, and primary metal products also posted gains in output while manufacturing of computer and electronic products posted declines.

Other major categories that increased output are retail trade (0.6%) and real estate and brokers (2.2%). Among those that decreased output are utilities (0.6%) wholesale trade (0.6%), finance and insurance (0.4%), and construction (0.3%).

"After a strong third-quarter performance (+3.5%), economic growth in Canada has clearly lost momentum,î writes Dina Cover in a TD Bank Group report. "Overall, we expect the modest rate of expansion recorded in the fourth quarter to carry over into 2012.î

If the economy is slowing at the rate projected, this has serious implications for the management of your personal wealth. Cautious spending and reduced debt are in order, as is guarding your wealth against the eroding effects of personal income taxes. If the employment environment worsens, have a back-up plan in case job loss threatens your financial well-being; consider opportunities for self-employment. Having a disaster recovery plan will help see you through what could be a challenging 2012.