Release Explanation: This report measures the monetary value of all goods and services produced within a Country’s borders in a specific time period. GDP is calculated on an annual basis, is the broadest measure of activity, and the primary gauge of each economy’s overall health. It includes all Company and Personal consumption, government outlays, investments, and exports fewer imports, that occur within a defined territory.

A strong annual GDP outlook will lead to strong investment in an economy especially from overseas. A weak annual GDP outlook will usually lead to a slowdown in the economic business cycle. The yearly forecast is as important as the actual release number. As a reflection of the value of what an economy is producing, GDP will invariably have a ripple effect across all other economic releases, over a period of time:

Trade Desk Thoughts: According to Statistics Canada, real GDP declined 1.0% in December and by 0.8% in Q4 2008, led by declines in exports, capital investment and personal expenditures.

For the year, GDP grew by 0.5%, a sharp deceleration from 2.7% rate of expansion in 2007.

The volume of imports fell faster than exports. Both registered their largest quarterly decline since 1982. Prices of imports climbed, notably because the Canadian dollar depreciated 14% in the quarter relative to its U.S. counterpart. This is the largest quarterly depreciation relative to the U.S. dollar since Canada returned to a floating exchange rate in 1970.

The Canadian economy contracted at an annualized rate of 3.4% in the fourth quarter, compared with a 6.2% decline in the U.S. economy. The European Union registered a decline of 5.9% in the quarter, while Japan’s economy was down 12.7%.

Forex Technical Reaction: The cad fell after the report as crude futures continued their strong decline on the day. In recent trade, oil for March delivery was lower by 6.68%.