Wildfires cause Canada's biggest monthly GDP drop since 2009
By Leah Schnurr
OTTAWA (Reuters) - Canada's economy suffered its biggest one-month contraction in May since March 2009 as wildfires in northern Alberta caused a sharp drop in oil extraction, reinforcing expectations that the economy shrank in the second quarter.
Monthly gross domestic product fell 0.6 percent in May, data from Statistics Canada showed on Friday, exceeding economists' expectations for a decline of 0.4 percent.
The wildfires that started in May around the Fort McMurray area in Alberta disrupted production in the province's oil sands and forced residents from their homes in what is expected to be the country's costliest-ever natural disaster.
As a result, output from the non-conventional oil extraction industry saw a 22 percent drop for the month. Activity in the goods-producing sector overall fell 2.8 percent, including a 2.4 percent decline in manufacturing on a drop in output at petroleum refineries.
Economists and policymakers expect the economy shrank in the second quarter as a whole, due to the wildfires and a snap-back from strong export activity early in the year.
A sharp rebound is anticipated in the third quarter, with the Bank of Canada projecting 3.5 percent annualized growth.
"The issue now is (oil) production should come back in June. By the end of this month, it looks like it's fully recovered, and so we should see a reversal of the weakness," said Paul Ferley, assistant chief economist at Royal Bank of Canada.
"It should contribute to GDP bouncing strongly in the third quarter after a decline in the second." Continued...