Economy shrinks again in May as recession looms

WATCH: Canada is headed into a “technical” recession, new economic data suggests. Vassy Kapelos reports on what it means for the upcoming federal election.

The Canadian economy continued to contract in May amid a broad-based decline in output, new data released by Statistics Canada on Friday showed.

Real gross domestic product shrank 0.2 per cent in the month, a worse-than-expected decline. The consensus call from economists was for flat growth.

“Yet another downside surprise for the Canadian economy, which all but locks in a second quarterly setback,” Doug Porter, chief economist at Bank of Montreal, said.

The contraction represents the fifth month in a row that economic activity has receded — and six of the last seven — adding to overwhelming evidence that Canada has slipped into another recession.

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“With oil prices slumping again and energy producers announcing additional job and spending cuts, economic conditions appear to be going from bad to worse,” David Madani, an economist at Capital Economics in Toronto, said.

MORE: Canadian consumers still ‘doing their job’ amid weak economy

Oil and gas production declined one percent in the month, reflecting the global slide in oil prices and ongoing pullback among Canadian energy companies.

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But the monthly numbers also showed a surprisingly sharp slowdown in manufacturing — an area of the economy policy makers are banking on for growth as other areas slow, such as the energy industry and household consumption (which is confronting record consumer debt).

Real-estate reliance

Of the 11 areas of the economy that Statscan tracks, seven posted declines while four rose modestly including retail and construction activity as consumer spending and residential home-building grew.

“The output of real estate agents and [mortgage] brokers rose 2.1 per cent in May, up for a fourth consecutive month,” Statscan said.
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Factory hit

Real factory output declined 1.7 per cent, even as the U.S. economy gathers momentum, which should be providing a bigger lift to the domestic economy but isn’t yet, experts say.

“[May’s contraction] wasn’t all due to troubles in the oil patch,” Nick Exarhos, economist CIBC, said. “Canadian manufacturing output is on a clear downtrend, and is now at levels that were last seen over a year ago. Factories took off roughly two ticks from monthly GDP, which was an even bigger hit than the energy sector provided.”

WATCH: With a federal election looming, Global News asked voters about their priorities. Chief among them was the economy, Laura Stone reports.

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