Canadian economy shrank in May after stagnant April: Statistics Canada
August 2, 2011
By The Canadian Press
Canada’s economy shrank by 0.3 percent in May, the second consecutive monthly decline, with slumps in mining, oil and gas production and manufacturing.
Statistics Canada said the shrinkage comes on the heels of a stagnant April. The last rise in the real gross domestic product was the increase of 0.3 percent recorded in March.
There was growth in the wholesale and retail trade, the public sector and utilities, as well as the finance and insurance sector.
CIBC World Markets economist Emanuella Enenajor called the fall in GDP “disturbing” and said it doesn’t bode well for the next quarter.
“Overall, a very weak report, suggesting second quarter GDP will not likely come close to our prior call of 1.6 percent or the (Bank of Canada’s) call of 1.5 percent,” she said in a note.
Mining and oil and gas fell 5.3 percent in May after two consecutive monthly increases, Statistics Canada said in the report.
Manufacturing fell by 0.4 percent, with production of non-durable goods off 1.4 percent. Production of durable goods increased 0.4 percent. Production of motor vehicles and parts fell 0.5 per cent in May, after a larger slump in April, which was blamed on the after-effects of the Japanese tsunami. However, production of computer and electronic products, chemicals and machinery rose.
Construction slipped 0.3 percent as declines in engineering, repair work and non-residential construction outweighed an increase in home building.
Wholesale trade advanced one percent, with growth in machinery and equipment, as well as agricultural supplies. Wholesaling of petroleum products and motor vehicles was down.
Retail trade grew by 0.2 percent, with higher sales at building material and garden equipment stores and general merchandise stores.
BMO Capital Markets deputy chief economist Douglas Porter said with this weak report, growth for all of the second quarter will struggle to get much above a 0.5 percent annual rate, well down from 3.9 percent in the first quarter.
“Canada’s economy was hit by one thing after another in the spring, and it now faces yet another hurdle from the deepening uncertainty emanating from the U.S. debt drama,” Porter wrote in a research note.
“While we believe that the most likely outcome is a mild pick-up in growth over the second half, the starting point is even weaker than we expected, and there are still clearly plenty of potential dangers lurking ahead for the economy,” he said.
Porter also said he doesn’t expect the Bank of Canada to raise interest rates as a result of the weak growth.