Under the Conservative Harper government, the Canadian economy posted a decline driven partly by the slump in oil prices and described as the worse in almost six years, Statistics Canada (StatsCan) reported.
The report dragged the Canadian dollar lower to about C$ 79.26 against the greenback although it rallied later.
Even Central Bank Gov. Stephen Poloz described the economy’s negative performance as “atrocious.” The drop was significantly slower than the fourth quarter’s downward-revised 2.2% growth, and was the worst performance since the second quarter of 2009, when the economy was in the grips of the global credit crisis.
It was also the first time Canada’s economy has failed to expand since the second quarter of 2011, which saw zero growth.
Analyst said this development could have a long term effect on employment. The service sector in Canada is vast and multifaceted, employing about three quarters of Canadians and accounting for 78% of Gross Domestic Product, an economic measure of all goods and services produced in Canada.
Six months before a federal election, changes implemented by the Harper government literally destroyed the Live-in Caregiver Program, affecting thousands of Filipinos hoping to gain entry as permanent residents. But political observers noted Canada’s aging population, traditionally a Conservative bulwark, stands to lose more.
The official policy limiting temporary foreign workers to only four years, while severely affecting the Philippines as a source country for labor, will also have an impact on Canadian provinces with acute labor shortages, economist noted.
The largest employer, also severely affected by the negative economic performance, is the retail sector, employing almost 12% of Canadians, a CIA fact book noted. The retail industry is mainly concentrated in a small number of chain stores clustered together in shopping malls. In recent years, there has been an increase in the number of big-box stores, such as Wal-Mart and Best Buy. But closures of stores such as Future Shop, Target and several others have impacted employment in the service sector with Alberta topping the list.
The second largest portion of the service sector is the business services, employing only a slightly smaller percentage of the population. This includes the financial services, real estate, and communications industries.
In terms of international trade, the value of exports to the United States decreased for a second straight quarter, down $3.7 billion following a $2.2 billion decline in the fourth quarter of 2014. Moderating this decrease were lower imports from the United States.Declines for both exports and imports were led by crude petroleum.
Goods traded with non-US countries produced a similar downward change in the balance. The deficit widened by $2.7 billion to $13.3 billion, mainly on higher imports. The trade deficit with China expanded by $1.1 billion to a record $5.4 billion.
Trade balances with Japan, Italy, Netherlands, Switzerland and Taiwan all deteriorated during the first quarter. However, trade balances with United Kingdom and Singapore improved, Statistics Canada reported.
StatsCan said nominal Gross Domestic Product decreased 0.7% in the first quarter. This was the first decrease since the second quarter of 2009.
The large decline in energy prices, which will see Alberta headed for a recession, had a significant effect on economy-wide incomes and expenditures in the quarter. While total real GDP fell 0.1%, real GDP excluding expenditure on energy products fell 0.2%.
Compensation of employees rose by only 1.1% following a 0.5% gain in the fourth quarter of 2014. Wages and salaries in services-producing industries grew by 1.2% while in goods-producing industries they fell 0.2%.
Real gross domestic product fell 0.2% in March, down for a third consecutive month. A contraction in the output of goods-producing industries outweighed an overall increase in the output of service industries.
Goods production contracted 1.0% in March, down for a third consecutive month, primarily as a result of declines in mining, quarrying, and oil and gas extraction and, to a lesser extent, construction.
The trade in goods deficit expanded by $5.2 billion to a record $7.2 billion in the first quarter.
This change reflected a gradual deterioration of the goods balance in each month of the quarter. This followed a return to a deficit on goods trade of $2.0 billion in the fourth quarter of 2014.
Overall exports of goods declined $4.1 billion to $128.0 billion in the first quarter. Energy product values were down $5.9 billion despite higher volumes (+3.9%). This reduction was concentrated in crude petroleum.
Crude prices fell 32% in the quarter, reaching their lowest levels since the first quarter of 2009. Metal and non-metallic mineral products also declined in the first quarter (-$0.8 billion) as export volumes of precious metals shrank, StatsCan reported.
