GDP slump continues for fifth month

OTTAWA Canada’s economy has gone from a star performer on the international stage to a shrinking violet in a matter of just months.

Five months, to be exact — and all in a row.

The wilting output, which began in January as the oil-price shock gained momentum, continued into May as gross domestic product — the broadest measure of the country’s goods and services — declined 0.2 per cent during the month, according to the most recent data available from Statistics Canada.

That’s well below the expectations of analysts, most of whom had been looking for at least a flat reading in May.

The biggest impact of that month’s contraction — and the main cause of it, as well — was in the struggling energy sector, alongside meagre and long-standing manufacturing activity, the federal data agency reported Friday.

“The economy’s performance was worse than everyone expected,” said David Madani, Canada economist at Capital Economics in Toronto.

Hardly the right stuff for launching a federal election campaign. But the incumbent Conservatives could do just that, possibly calling for a vote as early as this weekend. What the Harper government cannot do is change the course of the economy mid-campaign.

With the national vote set for Oct. 19, that leaves two more monthly GDP reports to be delivered — one next month for June, and another in September for July.

By then, Canada might already be in a recession, like in 2008-09, but perhaps not as severe.

For months, Finance Minister Joe Oliver has maintained the Canadian economy was “still better than the average” performance of other Group of Seven economies. That declaration will have to be tweaked during the election.

On Friday, Oliver told the Financial Post in a statement that “the global economy remains fragile and is being dragged down by forces beyond our borders such as significant decline in oil prices, the European debt crisis and China’s economic slowdown.”

“Now, more than ever, we must continue with our low-tax plan for jobs and growth, strong financial fundamentals and a balanced budget,” he said.

But the budget — balanced or not — is still in question. After all, the Conservatives delayed their annual spending document during the 2008-09 recession in order to get a better handle on the impact on Canada of the global fallout.

They could do the same this time if re-elected and if the outlook for the economy is still fuzzy.

GDP overall has declined 0.8 per cent since December of last year, when the economy grew 0.4 per cent. Beginning in 2015, Canada’s performance — and that of the United States — was hit by harsh winter conditions and, more importantly, the initial impact of the global collapse in oil prices.

“After contracting by an annualized 0.6 per cent in the first quarter, the incoming data suggest that the economy shrank by as much as 1.5 per cent in the second quarter,” Madani said. “While we expect to see some slight improvement in the second half of the year, it still looks like the economy will be lucky to grow by one per cent for this year as a whole.”

Investment in energy projects began to dry up at the start of 2015, depressing economic output, particularly in Alberta. Oil prices continued to fall on Friday, trading below US$47 a barrel, after closing at US$48.52 on Thursday.

The end of trading for July marked the biggest monthly decline since October 2008, during the global recession.