Canada’s economy shrank at an 8.2 per cent annual pace in the first three months of 2020, as an already weak economy in January and February was walloped by COVID-19 in March.
Statistics Canada reported Friday that the slowdown was the sharpest quarterly drop since the financial crisis of 2009, as measures to contain the pandemic such as school and business closures, border shutdowns and travel restrictions brought economic activity grinding to a halt.
While bleak, the eight per cent decline was better than the ten per cent contraction that economists had been expecting for the period. For comparison purposes, the U.S. economy shrank by five per cent over the same time frame.
While the vast majority of the contraction came in March when the pandemic hit, January and February’s numbers weren’t overly strong to begin with due to pre-existing drags such as rail blockades across the country, and a teacher strike in Ontario in February.
In absolute terms, Canada’s gross domestic product was 2.1 per cent smaller over the three months than it was at the end of 2019. But much of that came in March alone, as GDP declined by 7.2 per cent during the month. That makes March 2020 the worst month for Canada’s economy since record-keeping began in 1961.
Just about everything got walloped, as 19 out of the 20 sectors the data agency monitors got smaller. The one exception was utilities, which eked out a gain of 0.4 per cent.
While March shattered the previous monthly record for slowdowns, early data suggests April’s numbers will be even worse, showing an 11 per cent contraction from March’s already depressed level.
By sector, the slowdown in March was striking, including:
- Accommodation and food services, down 39.5 per cent.
- Transportation and warehousing, down 12.2 per cent.
- Air transportation, down 40.9 per cent.
- Manufacturing, down 6.5 per cent.
- Retail trade, down 9.6 per cent.
- Educational services, down 13.5 per cent.
- Arts, entertainment and recreation, down 41.3 per cent.
- Construction, down 4.4 per cent.
- Mining, quarrying, and oil and gas extraction, down five per cent.
Economist Doug Porter at Bank of Montreal found some reasons for optimism amid the gloomy numbers, noting that many parts of the economy did better than initially feared.
“The new news here is that the figures were a little less dire than feared,” he said. “Consumer spending fell only nine per cent in the quarter, while business investment was down a mild 2.7 per cent (less bad than Q4 in fact), and housing dipped just 0.4 per cent.”
Overall, Porter said the 8.2 per cent pace of contraction puts Canada right in the middle of its G7 peers. Canada’s economy did worse than Japan’s, which shrank at a 3.4 per cent pace, over the period. But Canada is faring much better than Italy and France, which saw their economies shrink at paces of 17.7 and 21.4 per cent in the same period.