Economy to shrink in Q2, banks say

DOWN 10% TO 24%

Some of Canada’s largest banks are revising down their growth forecasts once again as industry shutdowns and layoffs suggest the recession will be deeper than originally expected.

The nation’s economy is likely to shrink by somewhere between 10 per cent and 24 per cent in the second quarter on an annualized basis, the latest forecasts show. That would mark the largest quarterly decline since at least the early 1960s, when comparable data began.

That would also be much deeper than the current record of -8.7 per cent during the 2008-09 financial crisis. The labour market will take a beating as well with predictions for the unemployment rate to rise as high as 10 per cent. To put that in perspective, Canada’s job market was in fairly healthy condition until a month ago, with the unemployment rate below six per cent, close to all-time lows. The half-million jobless claims filed last week, representing 2.5 per cent of the labour force, has only reinforced the concerns.

Here are the latest revisions by Canada’s largest banks:

BANK OF MONTREAL

Predicts 2020 growth at -1 per cent, down a full percentage point from last week’s call of zero; sees contractions of 2.5 per cent in Q1 and 10 per cent in Q2, on annualized basis; big rebound in second half; expects Bank of Canada to cut by 50 basis points by mid-April meeting.

BANK OF NOVA SCOTIA

Forecasts 2020 growth at -2.2 per cent; also predicts three straight quarters of negative growth; sees Q1 at -1.3 per cent, Q2 at -10.7 per cent, Q3 at -3.4 per cent, all annualized.

CANADIAN IMPERIAL BANK OF COMMERCE

Expects 2020 GDP at -2.6 per cent; sees contractions in Q1 of 1.7 per cent and Q2 of 18.4 per cent; also sees unemployment rate peaking at 9.3 per cent in Q3; predicts Bank of Canada to cut by 50 basis points, bringing target in line with the U.S. Fed.

TORONTO-DOMINION

BANK

Predicts 2020 GDP growth at -3.3 per cent; forecasts Q1 contraction of 1.2 per cent and Q2 of 24 per cent before second-half rebound; sees unemployment rate peaking at 9.8 per cent in Q2.

JAMES MACDONALD / BLOOMBERG Shipping containers are idled in Vancouver on Saturday as the economy slows down.