MNI DATA REACT: Canada Q1 GDP -8.2% Annualized, Forecast -10%

--Biggest Decline Since 2009 Sets Up Much Worse Q2 Amid Full Lockdown

By Greg Quinn

     OTTAWA (MNI) - Canada's first-quarter GDP fell at an 8.2% annualized pace,

the fastest since 2009 and setting the stage for the biggest shock in the

nation's history this quarter as Covid-19 health lockdowns took full effect. 

     Household spending dropped at a record 9% including sharp falls in

clothing, automobile sales and travel services. Exports and imports both tumbled

more than 10% and business investment excluding housing fell by 2.7%, continuing

years of weakness. 

     Even the government's push to get relief cash out the door wasn't enough to

boost its spending as the pandemic closed schools and administration offices.

Government consumption fell 3.8%, the most since 2013. 

     The first quarter ended with a monthly reading for March of -7.2%, the

worst in records back to 1961, suggesting a weak handoff to the second quarter.

Statistics Canada said early evidence suggests April GDP fell another 11%. 

     Both figures were better than the MNI economist median of -9% for March and

-10% for the quarter. Still, economists have said a monthly decline approaching

9% is consistent with other evidence GDP may drop at a 40% annualized pace in

the second quarter. The Bank of Canada says total output may decline 15%-30% in

the first half of the year. 

     --SLOW RESTART

     "Spending reductions were influenced by substantial job losses, income

uncertainty, and limited opportunities to spend because of the mandatory closure

of non-essential retail stores, restaurants and services, and restrictions on

travel and tourism activities," Statistics Canada's report Friday said.

     Policy makers have responded with near-zero interest rates, unprecedented

BOC asset purchases including CAD5 billion a week of government bonds and a

federal 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.

     StatsCan said health restrictions means it couldn't collect all of its

regular data for construction, finance and auto sales. 

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

[TOPICS: MACDS$,M$C$$$]