Canada: Economic output flatlines in February; preliminary estimate for March suggests a survey-record decline in activity
April 30, 2020
The economy stalled month-on-month in February, which was down from the 0.2% increase in January and slightly below market expectations of a 0.1% rise. Economic growth clocked in at 2.1% year-on-year in February, which was stronger than January’s 1.9% rise.
Moreover, on 15 April, Statistics Canada released a special flash estimate of GDP for March to provide an estimate of the scale of economic disruption resulting from Covid-19 containment measures. The preliminary figure pointed to a 9.0% decline in activity on a month-on-month seasonally-adjusted basis—the steepest fall since current records began back in 1961.
In February, activity in the transportation and warehousing, educational services and manufacturing sectors decreased. On the upside, the mining and quarrying, real estate, and wholesale and retail trade sectors expanded robustly. Statistics Canada did not release a detailed breakdown for March, but noted that the travel and tourism, transportation, and restaurants and accommodation sectors were among the hardest hit due to the Great Lockdown. Moreover, despite the sharp decline in energy prices and a pullback of investment activity into the energy sector, March’s preliminary data indicated volume of oil and gas extraction was largely unaffected in March.
Overall, the first quarter was likely one of the worst in history, and economic conditions are expected to further worsen in Q2 as containment measures intensified in April. Stimulus measures taken by the government, the Bank of Canada and other publicly-owned corporations should cushion the economic fallout going forward. Nevertheless, the economy is still seen contracting at one of the sharpest rates on record, with risks heavily skewed to the downside. Depressed oil and gas prices could force policymakers to curtail production to balance out markets, which would hammer the energy sector and the economy at large this year.
Author: Steven Burke, Economist