Canada’s economy shrank between January and March, the first contraction in four years and the largest since the 2009 recession as collapsing energy prices prompted a plunge in business investment.
Gross domestic product fell at a 0.6 percent annualized pace in the first quarter, Statistics Canada said Friday in Ottawa. The drop exceeded all 22 economist forecasts in a Bloomberg News survey with a median estimate of a 0.3 percent expansion. The agency also revised its fourth-quarter growth estimate to 2.2 percent, from 2.4 percent previously.
Bank of Canada Governor Stephen Poloz predicted this week economic growth in the first quarter would be flat. He also held the central bank’s benchmark rate at 0.75 percent, where it’s been since he cut the rate in January, calling that move “insurance” against the oil-price shock. Policy makers expect lower energy prices to spark a rebound, led by non-energy exports.
Business gross fixed capital formation fell at a 9.7 percent annualized pace in the first quarter, the most since the first three months of 2009. Support activities for mining and oil and gas extraction fell by 30 percent.
Consumer spending growth slowed to an annualized 0.4 percent rate, the slowest since the start of 2009, from 2.1 percent in the fourth quarter. Transportation fell for the first time in 10 quarters, as vehicle purchases declined.
Exports fell 1.1 percent, the second straight quarterly decline. Imports dropped 1.5 percent.
Crude oil is Canada’s top export, and lower prices triggered a deterioration in housing markets in Alberta, site of major oil sands deposits. The Bank of Canada forecast output would be little changed between January and March before quickening to a 1.8 percent annualized pace in the second quarter.
On a monthly basis, Canada’s gross domestic product fell 0.2 percent in March, the third straight decline. The contraction was led by a 2.6 percent fall in mining, quarrying, and oil and gas extraction. Economists forecast a monthly GDP expansion of 0.2 percent.
