Canada's economy saw record decline in March; worse numbers forecast for April – The Globe and Mail

The Canadian economy took a record-setting dive in March as provinces imposed lockdown measures to curb the spread of COVID-19, a preview of worse numbers to come for April.

Real gross domestic product fell 7.2 per cent in March from February, the largest monthly decline since the series began in 1961, Statistics Canada said Friday. For the first quarter, real GDP dropped at an 8.2-per-cent annualized rate, the worst since the financial crisis.

Worse numbers are on the way. The statistical agency estimated an 11-per-cent decline in real GDP in April, the first full month with lockdown restrictions in place.

Contractions were nearly unavoidable. Nineteen of 20 industrial sectors were down in March, highlighted by steep declines in accommodation and food services, arts and recreation, and transportation and warehousing.

Household spending fell 2.3 per cent in the first quarter, the largest quarterly decline on record.

“Spending reductions were influenced by substantial job losses, income uncertainty and limited opportunities to spend because of the mandatory closure of non-essential retail stores, restaurants and services, and restrictions on travel and tourism activities,” Statscan said.

Both export and import volumes fell in the quarter for a multitude of reasons: weaker demand, the halt in cross-border tourism, the shutdown of manufacturing plants and the rail blockades in February. A weaker Canadian dollar also weighed on imports.

As expected during a recession, people are saving more cash, when it’s possible. The household savings rate climbed to 6.1 per cent in the first quarter from 3.6 per cent in the fourth quarter. This is an aggregate rate, with Statscan noting that “in general, savings rates are higher for higher income brackets.”

The second quarter is shaping up as a decimation. Bank of Montreal has forecast that real GDP will collapse at a 44-per-cent annualized rate before rebounding in the third quarter. Much of the damage will be restricted to April, given that provinces embarked on reopening plans in May.

As such, it’s possible that April will represent the bottom of the economic downturn. In May, several indicators – new job postings, cross-border truck crossings and business confidence – have shown improvement, although remain well below precrisis levels.

Earlier this week, the Conference Board of Canada said national real GDP would decline by 4.3 per cent in 2020, with Prairie provinces faring the worst.

“Just three months ago, we were projecting 2020 to be the first year of a long awaited economic recovery in Alberta,” the think tank said. “Now, the province is eyeing its worst recession on record.”

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