Newspaper article The Canadian Press

Alberta Fires Torch Economy, Biggest Monthly GDP Decline in More Than 7 Years

Newspaper article The Canadian Press

Alberta Fires Torch Economy, Biggest Monthly GDP Decline in More Than 7 Years

Article excerpt

Canada sees biggest GDP decline in 7 years

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OTTAWA - The Alberta wildfires torched the Canadian economy in May, driving the country into its worst one-month performance since the darkest days of the Great Recession seven years ago.

On Friday, Statistics Canada's latest reading for real gross domestic product showed a contraction for the month of 0.6 per cent, a number that revealed the extent of the economic fallout caused by the blazes that roared through the heart of oilsands country.

The dip in the economy was a little deeper than expected. Economists had predicted real GDP to recoil 0.4 per cent, according to Thomson Reuters.

The number, Canada's worst monthly figure since real GDP fell 0.8 per cent in March 2009, supported the already-dismal growth prospects for the second quarter.

The wildfires led to the evacuation of Fort McMurray, destroyed more than 2,000 structures and shut down key crude operations.

The decline in real GDP for May was largely due to a 22 per cent drop in non-conventional oil extraction, which Statistics Canada said was the sector's lowest level of output since May 2011.

The agency said the disaster was the main contributor to the 6.4 per cent drop in the overall natural resources sector and the 2.8 per cent decline in the output of all goods-producing industries.

Manufacturing output was also hurt. The industry was knocked back 2.4 per cent in May in large part due to a 15 per cent drop in output at petroleum refineries, which was created by a shortage of crude oil.

Even without the negative consequences of the fires, the economy still had disappointing results in other sectors.

Excluding the decline in non-conventional oil extraction, real GDP moved backwards in May by 0.1 per cent, Statistics Canada said.

CIBC chief economist Avery Shenfeld pointed to a weakness in capital spending by businesses, a letdown in exports and a decline in construction.

"There were fires raging in Alberta, but the rest of the economy wasn't so hot," said Shenfeld. But he suggested the feeble number for May should be put into perspective.

"Excluding that one (non-conventional oil) sector, GDP was down 0.1 -- that is not the worst month we've seen," he said. …

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