Canada: GDP to shrink 40.0% in annualized terms in Q2 – NFB

According to data released on Tuesday, the Canadian economy suffered a record contraction in activity during April hit by the coronavirus. Jocelyn Paquet, analyst at National Bank of Canada explains that even if the economy rebounded in May and June as expected, it will still be on its way to one of the worst quarters on record.

Key Quotes:

“Canada’s real GDP plunged 11.6% in April, a tad better than the -12.2% print expected by consensus but still the steepest monthly drop recorded in data going back to 1961.”

“The measures put in place to contain the spread of the coronavirus took a heavy toll on the Canadian economy in April, with real GDP shrinking at an unprecedented pace in the month. Goods sector output plummeted as many factories were either completely shut or operated below capacity.”

“Production in the motor vehicles (-97.7%) and parts (-86.4%) segments virtually stopped, while food output (-12.8%) suffered from closures at meat-processing plants following outbreaks of the coronavirus.”

“With luck, April will mark the low point for GDP given that the economy gradually reopened in May - Statistics Canada preliminary estimate predicts a 3.0% increase in output in the month. But partial rebounds in May and June are unlikely to salvage what is gearing up to be one of the worst quarters on record.”

“We expect GDP to shrink 40.0% in annualized terms in Q2.”