Canada's Economy Shrinks at 3.4 Percent Pace

Canada's economy contracted at the fastest pace since 1991 in the fourth quarter, adding pressure on policy makers to cut the country's benchmark lending rate to a record low tomorrow., Bloomberg 3/2/2009 6:02:16 AM

Gross domestic product fell at a 3.4 percent annualized rate to C$1.32 trillion ($1.03 trillion) between October and December after 0.9 percent growth in the previous quarter, Statistics Canada said today in Ottawa.

The world's eighth-largest economy will keep shrinking through the first two quarters of this year, economists predict, marking the first recession since 1992. The Bank of Canada will probably cut its key lending rate tomorrow to a record low of 0.50 percent, a Bloomberg survey of economists shows.

Exports fell 4.7 percent in the fourth quarter, the sixth straight decline. It was the longest slump in more than 60 years of records, Statistics Canada said. Half of the drop came from automotive shipments. Imports fell 6.4 percent, also because of lower automotive shipments.

Capital investment fell 3.9 percent. Household spending fell for the first time since 1995, declining 0.8 percent, the agency said. Final domestic demand fell 1.2 percent, the first quarterly decline since 1990.

On a monthly basis, the economy shrank 1 percent in December, the most since October 1982, as manufacturing and retailing fell.

The fourth quarter decline slowed Canada's 2008 growth to 0.5 percent, the least since 1991. Gross domestic product grew 2.7 percent in 2007.

Statistics Canada reported last month a record job loss of 129,000 in January, and the agency's leading economic indicator fell the most since 1982 in January.

The economy is struggling because of a global recession, which is hitting exports of Canadian automobiles, paper, metals and energy. Prices of Canada's commodity exports have plummeted 53 percent since July, Bank of Canada figures show.