Canada economy contracts by most in 6 years in first quarter

Fri May 29, 2015 1:01pm EDT
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By Leah Schnurr

OTTAWA (Reuters) - Canada's economy contracted by the most in nearly six years in the first quarter, with business investment and exports both falling as the country grappled with a slump in oil prices.

Growth in March was also disappointing, suggesting a weaker handoff to the second quarter than anticipated.

This prompted analysts to question whether the Bank of Canada's forecast for renewed momentum later in the year was overly optimistic.

Gross domestic product shrank at an annualized 0.6 percent rate in the first three months of the year, Statistics Canada said on Friday, well below the 0.3 percent growth economists had forecast.

The drop was significantly slower than the fourth quarter's downward-revised 2.2 percent growth, and was the worst performance since the second quarter of 2009, when the economy was in the grips of the global credit crisis.

It was also the first time Canada's economy has failed to expand since the second quarter of 2011, which saw zero growth.

Typically, two or more consecutive quarters of contraction are considered to mark a recession.

The data was slightly worse than the Bank of Canada's anticipation of no growth, though Governor Stephen Poloz had said the quarter would be "atrocious" as oil-exporting Canada felt the pain of cheaper crude.   Continued...

Production Associates inspect cars moving along assembly line at Honda manufacturing plant in Alliston, Ontario March 30, 2015.  REUTERS/Fred Thornhill