The Canadian economic growth contracted in the first quarter, shrinking 8.2 percent owing to the effect of the pandemic. Nominal GDP, which includes the effect of price changes, did not fare much better, shrinking 6.5 percent.
Social distancing to control the pandemic signified a rapid stop to several ‘high touch’ activities, so it was no surprise to see services consumption leading the contraction, down 10.8 percent. Because of its large share of spending, it subtracted 3.5 percentage points from headline growth on its own. Only non-durable goods spending rose, rising 12.9 percent, the most solid performance since the mid-1970s, underpinned by food and beverage stockpiling. Government expenditures dropped 3.8 percent, reflecting school and government office closures.
Business investment also dropped, although more modestly. This was mainly down to a fall in machinery and equipment spending, itself driven by declines in nearly all major subcategories. Residential structures investment dropped modestly, as strong new construction activity countered drops in renovations and ownership transfer costs. Investment in non-residential structures rose 4.1 percent on strength in both non-residential buildings and engineering structures.
Meanwhile, exports fell 12.3 percent, while imports dropped 9.3 percent. With inventories drawn down modestly given production disruptions, final domestic demand fell 6 percent on the quarter.
The March GDP data was slightly better than Statistics Canada’s earlier nowcast; but was still down 7.2 percent sequentially, with 19 of 20 major industries in decline. As expected, the fall was tilted towards the service producing industries. Statistic Canada also gave a nowcast update for April, expecting an ever larger monthly decline of 11 percent.
