A couple of months ago, I was starting to get pessimistic: GDP shrank in September, and falling oil prices were eroding a trade surplus that consisted entirely of energy exports. Growth was zero in October; things weren’t looking good. But bad things didn’t continue to happen. StatsCan’s leading indicator index continued to rise. Building permits kept going up. So did employment and the employment rate.

And now  GDP growth has bounced back, with a .2% increase in November (update: no doubt helped by strong 2007Q4 GDP growth in the US):

The reason? The battered and bruised manufacturing sector – and particularly motor vehicle production – has emerged as a source of economic growth:

Now that oil prices are falling, the CAD is falling with it. After hitting a peak of USD .90 in mid 2006, it’s depreciated by 4% since then, and is back to where it was at the beginning of 2006. The manufacturing sector had been hard hit by the appreciation of the CAD, and now it seems to be bouncing back.

And pretty quickly, too. Canada’s economy must be pretty nimble if it can absorb such sharp sectoral shifts (from manufacturing to oil and back again) with only minor ripples on the macroeconomy. Let’s hope this is an indication of how the US economy handles the eventual unwinding of its current account deficit.