Canada: Economy records largest contraction in over seven-years due to wildfires
July 29, 2016
In May, GDP fell 0.6% over the previous month in seasonally-adjusted terms, marking the worst result since March 2009. The figure contrasted the 0.1% increase recorded in April and was worse than market analysts’ expectations.
According to Statistics Canada, the decrease came on the back of a double-digit decrease in non-conventional oil extraction as wildfires in the province of Alberta forced a halt in production. Excluding non-conventional oil extraction, GDP tallied a modest 0.1% decline. In addition, manufacturing output fell in May and utilities swung to contraction. On the other hand, the public sector recorded the largest positive contribution to GDP. Commenting on the reading, Brian DePratto, Economist at Toronto-Dominion Bank points out:
“When we look through the wildfire-generated volatility, the picture that emerges is of an economy that, following a strong December and January, has been just trudging along. Average growth through the middle of the year looks to be effectively in line with (or slightly below) the economy's underlying potential, meaning that none of the economic slack that developed through 2015 is currently being absorbed. While this is not the worst outcome, it does point to an economy that is largely treading water as the adjustment to lower commodity prices continues.”
On an annual basis, GDP grew 1.0% in May, a deceleration from April’s 1.5% expansion. However, the overall trend edged up to 1.0% growth from 0.9% in April.