‘R’ Word Surfaces Amid Canada’s Slowdown
Canada said Monday that its economy shrank in February for the second month in a row, adding to a growing list of gloomy indicators similar to those heralding the 1982 recession.
Economists remained cautious about sounding the recession alarm after Statistics Canada, a federal agency, reported that real gross domestic product, seasonally adjusted, fell 0.1% in February after a January decrease of 0.3%.
The last time the economy contracted for two months in a row was during the 1982 recession.
“We’re talking about fairly sluggish growth that will skirt the boundary of recession,” Bank of Montreal economist Paul Ferley said. “It will come fairly close.”
Goods production and services output each fell 0.1% in the month. The drop in services was the first monthly decline since March, 1989, and most of the drop came in finance, insurance and real estate, the federal agency said.
“It confirms (that) growth in Canada is weakening quickly and significantly,” Bank of Nova Scotia senior economist Phil Howell said.
The recent increase in the prime lending rate to an eight-year high of 14.75%, triggered by an inflation-fighting central bank, is proving to be a heavy burden on businesses and homeowners.
At 14.25%, mortgage rates are about 1.5 percentage points below what they were in April, 1981.
Home sales in major Canadian cities tumbled by 22% in March from a year earlier. Prices on average were down 6.8% for the same period.
Retail sales fell sharply in February; car sales and other big-ticket items such as household furniture and appliances contributed to most of the decline.
Consumer and business bankruptcies across Canada have also increased in the first three months of the year.