Canada’s economy shrank at an annualized rate of 8.2 percent in the first quarter as consumers stopped spending and business ground to a halt because of the coronavirus pandemic, the government reported Friday.
Analysts had forecast an even bigger hit, of 10 percent.
Compared to the final quarter of 2019, the decline was 2.1 percent, Statistics Canada said, adding that the drop in GDP was the sharpest since the first quarter of 2009.
Household spending was down 2.3 percent — the steepest quarterly drop ever recorded.
“The Canadian economy collapsed in March,” said Benoit Durocher, economist at the Desjardins Bank in Montreal.
The downturn will be exacerbated in the second quarter, he predicted, on the basis of
Statistics Canada’s preliminary data which showed GDP fell by 11 percent between March and April.
That said, the figures for March were less gloomy than anticipated, pointed out Royce Mendes of CIBC.
That “means that the second quarter as a whole won’t look much worse than the roughly 40 percent annualized drop-off in GDP we had been expecting,” he added.
The first quarter drop in GDP followed measures introduced in mid-March to contain the pandemic, such as the closure of schools and non-essential businesses, border closures and travel restrictions.
Household spending fell by 2.3 percent in that quarter, while the household savings rate rose to 6.1 percent, down from 3.6 percent in the previous quarter, Statistics Canada said.
Massive job losses, income uncertainty and limited spending opportunities have contributed to the decline in consumer spending, the engine of the Canadian economy.
Government consumer spending also declined by 1 percent, the largest drop since the beginning of 2013, due to school closures and reduced government activity.
Exports and imports declined by 3 percent and 2.8 percent, respectively, as Canada’s major trading partners, notably the United States, China and most European countries, implemented similar public health measures.
Businesses sold $3.7 billion in non-agricultural inventories due to supply chain disruptions.
But sales volumes fell sharply as businesses closed and household demand declined.
Statistics Canada noted that the pandemic brought “unforeseen constraints on data collection and statistical operations. – AFP