Canada: Economy contracts in Q1
May 29, 2015
In the first quarter, GDP contracted at a seasonally adjusted annualized rate (SAAR) of 0.6% over the previous quarter. The result contrasted the 2.2% expansion recorded in the fourth quarter of last year (previously reported: 2.4% year on year). Moreover, the print was the lowest since Q2 2009 and undershot market expectations by 0.9 percentage points.
The slowdown in Q1 was driven by a contraction in domestic demand, particularly in terms of investment. Private consumption grew 0.4% in Q1, which was down from the 2.1% increase seen in the previous quarter. Fixed investment contracted a dramatic 7.0% in the first quarter, which contrasted the 1.0% increase observed in Q4 and marked the lowest reading since Q1 2009. Government consumption also contracted, falling 0.8% from the previous quarter (Q4 2014: +1.0% yoy).
In the external sector, exports of goods and services fell 1.1% in Q4, which was an improvement over the previous quarter’s deterioration of 1.7%. In addition, imports fell 1.5% in Q1, contrasting the 1.6% rise in Q4. As a result, the external sector’s net contribution to overall growth rebounded from minus 1.1 percentage points in Q4 to 0.2 percentage points in Q1.
Author: Robert Hill, Economist