- Derek Holt, Bank of Nova Scotia economist
Canada's economy unexpectedly shrank in the first quarter, marking the first contraction in four years and the largest since the 2009 recession as falling energy prices caused a plunge in business investment. Canada's gross domestic product fell 0.6% on an annualized basis in the first quarter, to 1.762 trillion Canadian dollars, according to Statistics Canada. Market expectations were for 0.3% growth in the January-to-March period. The Bank of Canada had expected GDP to be unchanged from the previous quarter. The fourth-quarter growth estimate was also revised to show 2.2% growth, down from 2.4%. Measured on a monthly basis, Canada's economic output dropped 0.2% in March, the third consecutive decline. The contraction was prompted by a 2.6% decrease in mining, quarrying, and oil and gas extraction. Economists had expected a monthly GDP expansion of 0.2%.
Canadian business investment was one of the worst areas hit during the quarter, falling 9.7%. The decline was largely driven by a drop in non-residential investments as well as machinery and equipment, down 15.5%. Meanwhile, investment in residential buildings was better. Also, consumer spending growth slowed to an annualized 0.4 percent rate, the slowest since the start of 2009, from 2.1 percent in the fourth quarter. Transportation fell for the first time in 10 quarters, as vehicle purchases declined.
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