Canada's economy started the year with a bang, but by the time spring rolled around, that bang had turned into a whimper.
In fact, as things stand, the booming housing markets in some cities are among the few things holding up the economy.
Economic output grew a solid 2.4 per cent in the first quarter of this year, Statistics Canada reported, but virtually all of that growth took place in January. February saw a 0.1 per cent contraction, and the downturn accelerated in March, with the economy shrinking 0.2 per cent, twice as fast as economists had anticipated.
That's "a signpost of a slowdown ahead," CIBC economist Avery Shenfeld said in a client note Tuesday morning.
Oil and gas was the biggest drag on the economy in March, but no sectors of the economy are growing quickly right now. (Chart: Statistics Canada)
The downturn was widespread. While oil and gas predictably led the decline in March, shrinking by 2.8 per cent, manufacturing shrank as well (down 0.2 per cent after falling 0.9 per cent in February).
And consumers began to show signs of exhaustion as well, with retail trade shrinking 1.3 per cent in March. Household consumption was up 0.6 per cent for the quarter as a whole, though Capital Economics senior Canada economist David Madani said this was due to "excessive household borrowing."
The lower loonie did its part as well to hold up the economy. Exports were the largest driver of the economy in the first quarter, StatsCan said, growing by 1.7 per cent.
Housing investment booms, other investment tanks
But the effects of soaring home sales and house prices provided a boost, with construction up 0.1 per cent and real estate agent activity up 2.2 per cent in March.
Investment in housing grew a solid 2.7 per cent in the first quarter of 2016, the fifth consecutive quarterly increase, StatsCan said.
But investment in other parts of the economy is fizzling -- a bad sign, given that business investment drives job growth and wage gains. Non-residential investment shrank a large 3.7 per cent in the first quarter, for a fifth consecutive decline.
In other words, more investment money is flowing into housing, while investment in other parts of the economy is drying up.
CIBC's Shenfeld noted that the bank now expects to see a shrinking Canadian economy in the second quarter. Thanks to the weak handoff from the first quarter and the Alberta wildfires that halted oilsands production, CIBC now sees the economy shrinking by 0.7 per cent in the second quarter, down from an earlier call of 0.5 per cent growth.
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More people are dying in road accidents, as falling oil costs translate into cheaper prices at the pump - increasing the number of journeys. "A $2 drop in gasoline price can translate into about 9,000 road fatalities a year in the US," sociology professor Guangqing Chi said last month. Chi told The Huffington Post that it typically takes almost a year for drivers to adopt new driving habits in response to changes in gas prices. Last year, US road deaths rose by 9.3% in the first six months of 2015. In the UK, while road deaths have fallen almost every year since 2004, provisional data suggests that fatalities increased in 2015 by 3%, alongside a 2.2% increase in traffic. Research has yet to reveal a link between these in the UK.
Pirates are unlikely victims of the global reduction in oil prices. Piracy in West Africa’s Gulf of Guinea is now at its lowest level since 2002. Speaking to Bloomberg, Florentina Adenike Ukonga, executive secretary of the Gulf of Guinea Commission, said: “With oil at a low bottom price of below $30 per barrel, piracy is no longer such a profitable business as it was when prices hit $106 a barrel a few years ago.” Attacks on oil transported declined by around a third last year, according to a report. Dyrad Maritime found sea crime figures for 2015 "painted a picture of optimism" - although the threat to vessels not carrying oil remains high.
Falling oil prices have translated into rock-bottom "bunker" fuel costs for shipping firms - reducing their incentive to take economical shortcuts. Rather than use routes via the Suez Canal, huge container ships are returning to ports in Asia via the "long way around" the southern cape of Africa. As prices tumble, burning more fuel is cheaper than paying passage rates through the waterway. For one-way passage, an oil transporter can pay as much as $325,000 (2008) to travel through the Suez canal. "For many services it is cheaper to sail south of Africa on the [return journey] than to use the canal routings,” SeaIntel, a shipping monitor, said.
Thousands of oil workers have been sacked as a result of dwindling oil prices. In the UK alone, 70,000 oil-related jobs are feared to have been lost since the price war began 12 months ago. Last month, oil giant BP shed 3,000 jobs on top of previously announced redundancies. An estimated 250,000 jobs have been lost across the oil industry as a whole worldwide.
The plunging oil price has added to turmoil on stock markets the world over, affecting many of the world's biggest pension funds. According to Reuters, shares fell sharply this week as oil prices dropped after Saudi Arabia effectively ruled out reducing the output of oil by its producers. Oil prices, lowered by increased production, are one of a number of factors worrying investors. The FTSE 100 index of Britain's biggest traded companies was down 15.38% on a year ago as of Wednesday. The index holds millions of Brit's pension pots. "The markets are really worried that we are missing something here, that the global slowdown may be more significant than we are recognizing and that slowdown could be causing oil prices to drop, and commodities prices in general," Tracie McMillion of Wells Fargo Private Bank told Reuters.
Perhaps the most surprising effect of diving oil prices has been that demand hasn't risen significantly. Despite costs plunging, European economies remain weak, China is decelerating and growing energy efficiencies mean vehicles need less fuel. So the overall effect has been a flatlining of demand, rather than an increase, according to PwC (PDF).
And despite all of this, airfares for passengers flying in and out of Britain jumped 46% from November to December 2015, the Office of National Statistics found. The increase in fares was the highest since 2002. The "highly variable" changes were a result of increased consumer demand for air travel, the ONS said. In America, air passengers were more likely to benefit from tumbling costs - airfares there were lower throughout most of last year.