‘A sour result’ as economy shrank in May, fifth consecutive monthly decline
Posted July 31, 2015 6:34 am.
This article is more than 5 years old.
OTTAWA – The Canadian economy contracted in May, the fifth consecutive monthly decrease, increasing the possibility the country slipped into a recession in the first half of the year.
Statistics Canada said Friday real gross domestic product fell 0.2 per cent in May due mostly to weakness in manufacturing, mining, quarrying and oil and gas extraction as well as wholesale trade.
Economists had expected no change for the month, according to Thomson Reuters.
“There is no sugar-coating this one,” said BMO chief economist Douglas Porter in a note to clients. “It’s a sour result.”
The drop in the economy came as goods-producing industries fell 0.6 per cent in May, including weakness in manufacturing and the oilpatch.
Manufacturing output contracted 1.7 per cent in May, while mining, quarrying, and oil and gas extraction fell 0.7 per cent.
Meanwhile, the service-providing industries edged down 0.1 per cent in May after increasing for three consecutive months.
Wholesale trade fell 1.0 per cent in May, but retail trade rose 0.5 per cent for the month.
The Canadian economy contracted at an annual pace of 0.6 per cent in the first quarter.
Concerns of a possible recession, defined as two consecutive quarters with no economic growth, have grown in recent weeks.
But some economists have said Canada hasn’t exhibited some of the classic hallmarks of a recession, citing the country’s job growth and stable employment rate.
Bank of Canada governor Stephen Poloz, in deciding to cut his key interest rate by a quarter of a percentage point to 0.5 per cent in an effort to boost the economy, carefully avoided saying the word “recession.”
“I’m not going to engage in a debate about what we call this,” Poloz said earlier this month after the central bank predicted the economy contracted an a 0.5 per cent annual pace in the second quarter.
Still, low oil prices and weak exports have bruised the economy this year, casting doubt on the federal government’s promise to balance the books as it heads into an election.
Estimates for economic growth this year have been slashed and now stand below the levels forecast when Ottawa tabled its budget in the spring.
But Prime Minister Stephen Harper said last week that his government was “well ahead” of its own forecast for a balanced budget despite the economic struggles.
