Canada

Tuesday, June 30, 2020 - 08:59

MNI POLICY: Canada May Flash GDP +3%, April Record -11.6%


By Greg Quinn

OTTAWA (MNI) - Canada's GDP fell a record 11.6% in April and a flash estimate suggests output rose 3% in May, signaling a turnaround for the economy from Covid-19.

The April decline was the largest in data going back to 1961 and covered all 20 major industries, Statistics Canada said Tuesday from Ottawa. Manufacturing dropped 22.5% as social distancing rules and border closures hindered production including a near total shutdown of automobile assembly. Petroleum and coal also dropped by a quarter amid a global supply glut.

Retailing fell 22.9% with clothing stories down by two-thirds and car dealers down 41.8%. Online shopping boosted the "non-store retailers" category by 17.3%. Air transport was down 93.7% as all major airlines cut back or suspended operations, and accommodations and food services fell 42.4% on the month.

May's partial recovery included re-openings in manufacturing, retail, wholesale and government services, StatsCan's report said.

--BOC INFLUENCE

The report will likely have a heavy influence on how BOC Governor Tiff Macklem lays out a "central planning scenario" for the economy's path out of Covid-19 at his first full meeting as Governor on July 15. Since taking over from Stephen Poloz June 3, Macklem has cited evidence the economy bottomed out early in 2Q and has a "deep hole" to climb out of, and affirmed plans for at least CAD5 billion a week of federal bond purchases.

The April decline was less than the 13% expected, according to an MNI economist survey.

Economist estimates for Q2 GDP range between annualized rates of -32% and -40%, after the economy shrank at a -8.2% annualized pace in Q1. While there's no direct way to compare today with the Great Depression of the 1930s, the CD Howe Institute think tank that grades recessions says output fell from 1929 through 1933 by around -30% or more, with unemployment moving to roughly 25%.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

[TOPICS: MACDS$,M$C$$$]

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