Canadian economy shrinks, on track for recession

Wed Dec 24, 2008 11:42am EST
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By David Ljunggren

OTTAWA (Reuters) - Canada's economy shrank in October on declines in wholesale trade and manufacturing, paving the way for a recession that has been widely predicted by analysts and government officials.

Statistics Canada said on Wednesday that the economy shrank by 0.1 percent in October from September, less than the 0.3 percent fall predicted by market analysts.

Year on year, gross domestic product growth was an anemic 0.2 percent, the lowest figure since the 0.2 percent increase recorded in May 1992.

"The decline in October GDP likely marks the start of recession in Canada," said Benjamin Reitzes of BMO Capital Markets Economics.

The technical definition of recession is two consecutive quarters of negative growth.

Ian Pollick, economics strategist at TD Securities, said he expected fourth quarter GDP to contract between 1.5 and 2.0 percent from the third quarter and to shrink by at least 0.7 percent from the year-before quarter.

"Either way you slice it, the Canadian economy is beginning to feel the weakness of the global economic slowdown," he said.

Wholesale trade fell by 2.7 percent in October over September, while manufacturing dropped by 0.7 percent, as both sectors felt the impact of a slump in the auto sector that is causing more and more pain for Canada.   Continued...

<p>People go shopping in a mall in downtown Toronto, December 23, 2008. REUTERS/Mark Blinch</p>