Canada’s economy stalls in April

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TAVIA GRANT
Globe and Mail Update
Published Thursday, Jun. 30, 2011 8:39AM EDT
Last updated Thursday, Jun. 30, 2011 10:13AM EDT

Canada’s economy stalled in April, kicking off what is projected to be a weak showing for the second quarter.

The country’s gross domestic product was flat in the month, Statistics Canada said Thursday, after expanding 0.3 per cent in March. Both the goods-producing and services sectors were unchanged.

Momentum has dwindled after a strong start to the year. Economists, and the Bank of Canada, expect growth to pick up in the last two quarters of this year, even as risks to the global economy – such as Europe’s sovereign debt crisis and concern over U.S. debt levels – remain elevated.

Growth in the second quarter will be “lacklustre,” said Douglas Porter, deputy chief economist at BMO Nesbitt Burns. “However, the bigger issue now is whether the economy can regain its mojo in the second half of the year, and there are still grounds for optimism on that score.”

He thinks growth will pick up to about 2.5 per cent in the next half of the year as gasoline prices simmer down and auto production rebounds, at least partly.

Lacklustre it may be, but the report still beat forecasts for a contraction in the month. The Canadian dollar rose, trading at $1.035, its strongest level in a month.

Mining saw, by far, the largest growth in the month and is the fastest-growing sector in the past year. The sector expanded 1 per cent in April on strength in copper, nickel, lead and zinc mining, as well as coal extraction. Support activities for mining and energy also continued to climb.

Retail trade, the public sector, construction and utilities also advanced, the federal agency said.

However, growth was tempered by drops in manufacturing, thanks to Japan’s tsunami triggered supply disruptions in the auto sector. Wholesale trade along with the finance, insurance and real estate sector shrank, while transportation services were unchanged.

Manufacturing tumbled 0.7 per cent, as a 6.9-per-cent drop in cars and parts production “was mostly due to supply disruptions as a consequence of the tsunami in Japan.” That drop, on top of lower production in aerospace, caused a 4.7-per-cent reduction in transportation equipment manufacturing, Statscan said.

Manufacturers of furniture and related products, along with printed products and electric equipment also cut back production. But manufacturing of mining and oil and gas machinery, along with food products, increased.

Retail trade grew 0.5 per cent in April, after a 1.2-per-cent drop the month before. Shoppers opened their wallets at furniture and home furnishings stores, new and used car dealers as well as at clothing and accessory stores.

Wholesale trade fell 0.5 per cent in April. Wholesalers of autos and auto parts saw declines, as well as petroleum products and building materials. On the flip side, wholesaling of food, beverage and tobacco products rose, and so did personal and household goods.

Construction inched 0.1 per cent higher on engineering and repair work.

Activity among real estate agents and brokers tumbled 4.4 per cent “reflecting lower home resale activity in most provinces,” Statscan said.

The finance and insurance sector fell 0.4 per cent on lower volumes of personal and business loans.