Economy worst in decade

Statistics Canada says the economy in the first quarter had its worst showing since 2009 as steps taken to slow the spread of COVID-19 forced businesses across the country to close their doors and lay off workers.

The agency said Friday gross domestic product fell at an annualized rate of 8.2 per cent in the first three months of 2020.

The collapse came as gross domestic product for March fell 7.2 per cent as restrictions by public health officials began rolling out during the month, including school closures, border shutdowns and travel restrictions.

Events earlier in the quarter also had a drag on GDP with Statistics Canada pointing to the Ontario teachers' strike and rail blockades in February, as well as a drop in oil prices.

Household spending, a backbone of the Canadian economy, was down 2.3 per cent in the first quarter of 2020, the steepest quarterly drop ever recorded.

The drop in household spending was broad, affecting goods and services.

Statistics Canada said new car purchases were down 8.8 per cent, trucks and vans by 9.4 per cent and used cars by 10.1 per cent owing to "income uncertainty," more people working from home and the closure of dealerships in some provinces, including Ontario and Quebec.

Housing spending on clothing and footwear dropped as well by 16.4 per cent, as did spending on food, beverage and accommodation services — by 10.9 per cent — and air transport — by 15.7 per cent — as bars and restaurants were ordered closed and travel restrictions kicked in.

Instead, spending on going out became money spent staying in, Statistics Canada said.

Spending on food and non-alcoholic beverages increased by 7.2 per cent in the first quarter, while there was a six per cent rise in spending on alcoholic beverages.

As a result of less spending overall, the savings rate rose for the quarter to 6.1 per cent from the 3.6 per cent recorded in the fourth quarter of 2019 with higher rates recorded at higher income levels.

The savings some households have built up during the shutdown period could translate into extra spending as restrictions are eased and businesses reopen, says CIBC senior economist Royce Mendes.

"Overall, the economy has likely troughed at least for now, with businesses beginning to reopen," he wrote in a note. "Look for the economic data to begin showing signs of revival over the summer months, even if it only represents the low-hanging fruit of eased restrictions."

The average economist estimate had been for a nine per cent drop in gross domestic product for March, while the average estimate for the first quarter as a whole is for a GDP pullback at a annualized pace of 10 per cent, according to financial markets data firm Refinitiv.

The national statistics office said preliminary information indicates an 11 per cent drop in GDP for April, but that figure is likely to be revised as more information becomes available.

"Nonetheless, the March and April decreases are likely to be the largest consecutive monthly declines on record," the agency said in an online post this morning.