Canada's GDP report to be grim reading

Thu Feb 26, 2009 5:27pm EST
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OTTAWA (Reuters) - Canada's economy suffered its biggest quarterly contraction since 1991 in the fourth quarter of last year, a report is expected to show on Monday, lengthening a string of bad economic news.

The median forecast in a Reuters poll of 16 analysts was for the economy to shrink 3.6 percent in the quarter on an annualized basis, following growth of 1.3 percent in the third quarter.

Canada's finance minister and central bank governor have acknowledged the country is now in a recession, generally defined as two consecutive quarters of negative growth.

"You're going to see negative numbers almost universally throughout this report, except perhaps for government spending," said Eric Lascelles, chief economics and rates strategist at TD Securities.

TD is on the pessimistic end of the forecast range with its prediction of a 4.2 percent contraction in the quarter. Lascelles said the "shockingly poor figures" emerging from the United States recently prompted the estimate.

"We thought we'd stick our neck out and predict a truly truly dire outcome as opposed to just an awfully bad one," he said.

In January, the Bank of Canada projected the economy would contract 2.3 percent annualized in the fourth quarter.

But since then Canadians have watched as grim economic data has emerged week after week, leading many economists to revise their forecasts downward.

In December, retailers had the biggest fall in sales in more than 17 years, factory sales plunged by a record 8 percent, and the country posted its first trade deficit in almost 33 years.   Continued...