Statistics Canada confirmed Friday what many economists had been saying: That Canada's economy shrank in the first quarter of 2015, under pressure from low oil prices.
The economy was contracting at an annual rate of 0.6 per cent in the first three months of 2015, StatsCan said. It's the first time Canada's GDP numbers have been negative for an entire quarter since 2011.
The mining, quarrying, oil and gas sector declined 2.6 per cent in March, the fifth consecutive month the sector has declined.
And the data suggests a degree of spillover from the oil sector to other parts of the economy. Construction, wholesale trade and manufacturing "posted notable declines" during the quarter, StatsCan said.
And while economists had been hoping to see signs of recovery in March, the final month of the first quarter, that did not seem to materialize. GDP fell 0.2 per cent in March, StatsCan reported.
The country "started the year in a tailspin," CIBC economist Avery Shenfeld wrote in a client note Friday.
The data was "weaker than expected by either the market or the Bank of Canada," Shenfeld wrote, and that "will keep speculation about a follow-up [Bank of Canada interest] rate cut alive, although an actual cut still seems unlikely unless the economy continues to struggle in the second half."
The Canadian Press reports:
It was the deepest Canada's real GDP plunged into negative territory since the second quarter of 2009 when it fell by 3.6 per cent during the recession, Statistics Canada said.
The first-quarter 2015 result followed a downwardly revised 2.2 per cent increase in the final three months of 2014.
Economic activity decreased in several categories, including business investment, exports, construction and the natural-resources sector — with mining and oil and gas extraction falling 2.7 per cent compared to the previous quarter.
Household spending inched upwards by 0.1 per cent, but it was the slowest growth in consumption in nearly three years.
Bank of Canada governor Stephen Poloz had warned the data for the first quarter could look "atrocious" and projected zero GDP growth — but he has remained hopeful the second quarter will churn out a 1.8 per cent advance.
The contraction for the first three months of the year compared with a 0.3 per cent increase that had been predicted by economists, according to Thomson Reuters.
The first-quarter reading for nominal GDP, which tracks the value of economic activity and is crucial to tax revenues, fell 0.7 per cent. The decline, blamed on the fallout from the big drop in energy prices on income and expenditures, means government coffers will take a hit.
Experts predict the economy to bounce back as the initial effects of the oil-price slide wear off.
The Bank of Canada has pinned its hopes for a turnaround in U.S. demand, which it still predicts will rise after the American economy slowed in recent months.
Poloz has noted that about seven months ago, the bank predicted 2.4 per cent growth in real GDP for the first quarter of 2015. Then, in January, the bank dropped that projection to 1.5 per cent before lowering it again last month — to zero.
Last month's federal budget predicted the country would shake off the oil slump and produce an average 2015 growth in real GDP of two per cent, followed by 2.2 per cent in 2016.
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