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How Did the Canadian Economy Perform in the First Quarter?

Everyone knew that Canada’s first quarter gross domestic product (GDP) numbers were going to be bad. The question was how bad? And what’s in store for the Canadian economy and stocks for the rest of the year? Canada’s GDP tumbled 8% in the first quarter with Statistics Canada warning a bigger drop could be on the horizon.

COVID-19 is behind the cratering of the Canadian economy. In the first quarter, Canada’s economy reported its worst monthly showing since the Great Recession in 2009. First quarter GDP tumbled 8.2% on an annualized basis. For comparison sake, in the U.S, real GDP retracted 5.0%. During March, the last month of the first quarter, GDP was down a whopping 7.2%, making it the worst month for the Canadian economy since record keeping started in 1961.

Most of that economic data is a result of measures taken to combat COVID-19, including the closures of schools and non-essential businesses, travel restrictions, and border closures. It can’t all be pinned on COVID-19, though. The Canadian economy was in rough shape before the pandemic. First quarter GDP was also hampered by weak economic momentum, the Ontario teachers’ strike, and February’s rail blockades.

Virtually the entire Canadian economy took a hit, with 19 out of 20 sectors retracing. There was one exception, utilities, which reported a princely 0.4% gain.

At the other end of the spectrum:

  • Accommodation and food services sector tumbled 39.5%
  • Air transportation plunged 40.9%
  • Transportation and warehousing fell 12.2%
  • Retail trade slipped 9.6%
  • Arts, entertainment, and recreation was down 41.3%
  • Construction skidded 4.4%
  • Mining, quarrying, and oil and gas extraction retracted 5.0%

What Is the Outlook for Canada’s Second Quarter GDP?

Canada’s first quarter GDP numbers show that the country is in it’s worst recession in decades. And, according to Statistics Canada, it looks like it’s going to get a lot worse in the second quarter.

April’s data is already showing an 11% contraction over March’s already abysmal showing. If current economic expectations hold, March and April 2020 could end up holding the record for having the worst consecutive monthly declines on record. 

According to some accounts, Canada’s second quarter GDP could crater an eye whopping 45% on an annualized basis.

There is growing optimism for the back half of the year though, with many economists predicting a rapid “V” shaped economic recovery. Whether that optimism continues, in the face of coronavirus flare ups, ongoing trade tensions between the U.S. and China, and protests across the U.S. (which have shut down local economies), remains to be seen.

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