MNI DATA PREVIEW: Canada Q1 GDP Seen -10% As Lockdown Began

--Annualized Contraction Would Be Worst In Postwar Records, Rival 1930s

By Greg Quinn

     OTTAWA (MNI) - Canada's first-quarter GDP due Friday will likely show a 10%

annualized decline as the Covid-19 lockdown took hold, and that's a fraction of

the second-quarter plunge that will rival anything in the nation's history.

     The MNI economist median mirrors the annualized reading indicated by

Statistics Canada's flash estimate published last month. Any double-digit

decline would beat the previous low point in modern records back to 1961, which

was recorded during the last recession in the global financial crisis.

     Economists are already projecting annualized GDP will drop 40% or more in

the second quarter, with a record two million people losing their jobs in April

as the health shutdowns took full effect. The combined declines may slash total

output by 15-30% from where it was at the end of last year according to the BOC,

even with near-zero interest rates, unprecedented asset buying and a government

deficit tracking to 15% of GDP.

     Officials already warn Covid-19 will cause permanent damage that prolongs

the economic restart, with obstacles from a second wave of infections to broken

supply chains and subdued demand for travel and close-contact services. Other

policy moves will prevent workplaces from a quick return. Canada's most populous

province is keeping schools closed through June without offering other daycare,

and the federal government wants provinces to offer 10 new days of annual paid

sick leave.

     Friday's report will also include monthly GDP for March. The MNI economist

median is for a record 9% contraction from February, in line with

already-reported drops in retail sales.

     "April will be the worst month for economic activity unless there's a major

second wave of the virus, and we might get a sneak peek at the numbers if the

flash estimate is released alongside these data," CIBC economist Royce Mendes

wrote in a research note. "While March and April will leave Q2 looking terrible

in terms of GDP, the green shoots showing up in May should actually see a return

to growth in the latter part of the quarter."

     While there's no direct way to compare today with the Great Depression of

the 1930s, the C.D. Howe Institute think-tank that grades recessions says output

fell from 1929 through 1933 by around 30% or more, with unemployment moving to

something like 25%.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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