POLITICS

Harper's Claim About Growing Economy Contains 'A Lot Of Baloney'

08/28/2015 08:19 EDT | Updated 08/28/2016 05:59 EDT

OTTAWA — "We all know what has happened there — the massive fall in global energy prices. But, you know, 80 per cent of the economy is actually growing." — Prime Minister Stephen Harper.

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When asked to explain why he thinks Canada is not currently in a recession, Stephen Harper blamed the falling price of oil, China's declining growth and the European Union's debt crisis. And he said that Canada's situation — its banking and financial sector — was otherwise basically solid.

How accurate is his assertion that 80 per cent of Canada's economy is growing?

Spoiler Alert: The Canadian Press Baloney Meter is a dispassionate examination of political statements culminating in a ranking of accuracy on a scale of "no baloney" to "full of baloney."

This one earns a rating of "a lot of baloney": the statement is mostly inaccurate but contains elements of truth.

A lot of baloney

THE FACTS:

Harper was relying on the Bank of Canada's latest monetary policy report, issued in July, which identified a drop in the oil and gas sector and the non-energy commodities sector, which together make up 17 to 18 per cent of gross domestic product.

For the rest, the bank reported a slight increase for the most recent quarter. But the Bank of Canada chart Harper referred to did not go into detail about other sectors and their growth. Rather, it lumped all of them together.

Statistics Canada's latest GDP report, meanwhile, showed it's not just the energy sector that's contracting.

From May 2014 to May 2015, the energy sector has indeed shrunk by 6.9 per cent, according to Statcan. But durable manufacturing industries scaled back their activity by 4.8 per cent, and industrial production fell by four per cent during that period, too.

WHAT THE EXPERTS SAY:

While Harper may be correct about the specifics of what the Bank of Canada was saying, there's still a larger picture to consider.

A lot depends on how data is analyzed, and over what time period, said Stephen Tapp, the research director at the Institute for Research on Public Policy.

Using monthly GDP data for 20 major industries from December to May, Tapp found that 11 industries grew while nine contracted. Excluding the energy sector, the GDP is down 0.4 per cent from December to May, he added.

"So, based on our current data, despite the fact that the downturn in Canada's economy has largely been a negative shock to the energy sector, other sectors have also contracted," Tapp said.

"Durable manufacturing industries were particularly hard hit, which is typical in recessions."

Former parliamentary budget officer Kevin Page, now the Jean Luc Pepin Research Chair at the University of Ottawa, described Harper's characterization as "cagey."

"Could 80 per cent growing and 20 per cent declining be a reasonable ratio? Yes," said Page, adding that it's rare in any recession to have all parts of the economy shrinking.

"You will see a larger percentage of the economy in shrink mode" in the Statcan figures comparing growth from April to May, he added.

"The bigger question is what is the state of the economy? The economy is weak."

THE VERDICT

The Bank of Canada report on which Harper's assertion is based was delivered in a broad, gloomy context: it had to scale back its economic growth prediction because of declines in the oil sector and exports.

Statistics Canada's GDP analysis shows unequivocally that there is hardship in the industrial and manufacturing sectors — above and beyond the contraction of the energy sector.

For these reasons, Harper's statement — that "80 per cent of the economy is actually growing" — contains "a lot of baloney."

METHODOLOGY:

The Baloney Meter is a project of The Canadian Press that examines the level of accuracy in statements made by politicians. Each claim is researched and assigned a rating based on the following scale:

No baloney — the statement is completely accurate

A little baloney _ the statement is mostly accurate but more information is required

Some baloney — the statement is partly accurate but important details are missing

A lot of baloney — the statement is mostly inaccurate but contains elements of truth

Full of baloney — the statement is completely inaccurate

Baloney Scale Chart

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