This was a nasty surprise:

Economic growth slowed considerably in the fourth quarter as real gross
domestic product (GDP) grew 0.2%, down from 0.7% in the third quarter.
Economic output contracted 0.7% in December.

The driving factor here is the fall in exports:

Exports recorded a significant 2.2% decline in the fourth quarter, in
the wake of a rising Canadian dollar and extended holiday shutdowns in
several motor vehicle manufacturing facilities. Meanwhile, strong
growth in final domestic demand and an accumulation of wholesale and
retail inventories drove imports up 2.6%. The drop in exports was the
first decline in six quarters, as Canada’s international trade balance
continued to deteriorate in the fourth quarter.

Elsewhere, the news wasn’t so bad:

Consumer spending picked up in the fourth quarter of 2007, boosted
by a 4.3% jump in motor vehicle purchases, higher travel spending
abroad and increased purchases of air transportation. Business
investment in machinery and equipment continued at a strong pace.

The output of the service industries expanded 0.7% in the fourth
quarter, while the goods-producing industries contracted 0.9%.
Wholesale and retail trade, along with utilities, recorded the
strongest growth.

The finance and insurance sector, construction, forestry, and
accommodation and food services also contributed to the overall
increase. These gains were partly offset by declines in manufacturing,
mining and selected transportation industries.

Corporate profits were up slightly (+0.5%), well short of the pace
set in the previous three quarters. Labour income registered a strong
fourth quarter. Employment and average earnings continued to grow in
the quarter.

I’m not sure that it’s time to panic just yet:

• The sharp drop in exports is worrisome, but if the CAD stops appreciating, then they may level off.
• We’ve already seen that December’s bad weather has skewed data from that month.
• Domestic demand and the factors that are driving it – wages and profits – are still holding up.