Canada Q2 economy shrinks, 1st time since recession

Wed Aug 31, 2011 10:31am EDT
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By Randall Palmer

OTTAWA (Reuters) - The Canadian economy shrank in the second quarter, its first quarterly fall since the 2008-09 recession, with temporary factors such as Japan's earthquake and tsunami playing a big role, Statistics Canada said on Wednesday.

Real gross domestic product fell at an annualized rate of 0.4 percent from the first quarter, worse than the median forecast of a 0.1 percent increase in a Reuters survey of economists. The economy grew by 3.6 percent in the first quarter.

Several economists said they expect a rebound in the third quarter as the impact of the second-quarter disruptions fades. If this is the case, Canada would escape the technical definition of recession -- two quarters of falls in GDP.

"It does not represent the real health of the Canadian economy," CIBC senior economist Benjamin Tal said. "You will see a nice bounce-back in the third quarter."

The decline was marked by a 2.1 percent (non-annualized) fall in export volume. That, in turn, was influenced by a supply disruption in the auto industry caused by the earthquake and tsunami in Japan, as well as by wildfires and maintenance shutdowns in Alberta that helped cut oil and gas extraction by 3.6 percent.

Flooding also affected the mining and energy sectors.

Business investment, housing investment and consumer spending were all up in the quarter.

For the month of June, Statscan said real GDP rose by 0.2 percent after a 0.3 percent fall in May, with the automotive and oil and gas industries posting recoveries.   Continued...