Statistics Canada reported yesterday (July 31) that Canada’s real gross domestic product (GDP) decreased 0.5% in May.  This is a greater percentage decline than in the previous three months, and worse than expected by most economists. This measure is by far the most accurate indicator of what is actually happening in the economy, as opposed to what people expect (or hope) to happen.  While expectations are high that the government stimulus measures are going to work, they have yet to bring any improvement in the goods and services actually produced. This is not yet to declare the stimulus policy a failure. It takes time for deficit spending to have an impact. It is on the other hand worrisome that credit expansion has not yet had more impact, since it should work faster, altho I believe that while credit and monetary factors are the proximate cause of the recession, they cannot fix it. Liquidity is now ‘trapped’ in various key sectors of the economy, with the result that more money and more credit achieves little and will likely cause significant future harm.. Domestic and international demand for goods and services must grow and expand before any real change can be expected. Broad based co-ordinated deficit spending on a world wide basis is all that is available in terms of policy to achieve this. More stimulus, anyone?

For 2009 GDP by month, go to http://www.statcan.gc.ca/daily-quotidien/090731/dq090731a-eng.htm