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OTTAWA (Reuters) - Canada`s economy shrank in the first quarter at the fastest pace since 1991, pushing the country into its sharpest two-quarter downturn on record, Statistics Canada data showed on Monday.
Real gross domestic product contracted 5.4 percent, annualized, in the first quarter of this year on sharply lower business investment and across-the-board weakness in manufacturing.
The decline followed a fourth-quarter contraction of 3.7 percent but was not as bad as the 6.6 percent drop expected by analysts.
Still, analysts were hard-pressed to put a positive spin on the report, which revealed the largest back-to-back quarterly decline since Statscan began collecting the data in 1961.
"It was a pretty bad fourth quarter, but a terrible first quarter. The only good news is that it will probably be the worst quarter in the cycle," said Don Drummond, chief economist at Toronto-Dominion Bank.
The Canadian dollar, which was trading around C$1.0825, or 92.38 U.S. cents before the data, weakened briefly just after the numbers were released, then firmed to C$1.08, or 92.59 U.S. cents.
The Bank of Canada, which has already cut its benchmark interest rate to a historic low of 0.25 percent, is unlikely to feel pressured to take further action to stimulate the economy as the first-quarter data compared favorably with its projection of a 7.3 percent decline.
"The decline is fairly sizable so I think the Bank will still be concerned about containing this weakness, so as a result likely continue to keep policy accommodative," said Paul Ferley, assistant chief economist at the Royal Bank of Canada.
"But it`s unlikely we will see any additional easing being introduced at the moment," he said.
Read the full article here.
Real gross domestic product contracted 5.4 percent, annualized, in the first quarter of this year on sharply lower business investment and across-the-board weakness in manufacturing.
The decline followed a fourth-quarter contraction of 3.7 percent but was not as bad as the 6.6 percent drop expected by analysts.
Still, analysts were hard-pressed to put a positive spin on the report, which revealed the largest back-to-back quarterly decline since Statscan began collecting the data in 1961.
"It was a pretty bad fourth quarter, but a terrible first quarter. The only good news is that it will probably be the worst quarter in the cycle," said Don Drummond, chief economist at Toronto-Dominion Bank.
The Canadian dollar, which was trading around C$1.0825, or 92.38 U.S. cents before the data, weakened briefly just after the numbers were released, then firmed to C$1.08, or 92.59 U.S. cents.
The Bank of Canada, which has already cut its benchmark interest rate to a historic low of 0.25 percent, is unlikely to feel pressured to take further action to stimulate the economy as the first-quarter data compared favorably with its projection of a 7.3 percent decline.
"The decline is fairly sizable so I think the Bank will still be concerned about containing this weakness, so as a result likely continue to keep policy accommodative," said Paul Ferley, assistant chief economist at the Royal Bank of Canada.
"But it`s unlikely we will see any additional easing being introduced at the moment," he said.
Read the full article here.