Data reveals much bleaker picture than anyone anticipated with weakness extending well beyond the energy sector
Canada’s economy practically came to a halt in the final three months of 2018, in a much deeper-than-expected slowdown that brings the underlying strength of the expansion into doubt.
While a slowdown was widely expected in the final months of the year due to falling oil prices, it’s a much bleaker picture than anyone anticipated with weakness extending well beyond the energy sector. Consumption spending grew at the slowest pace in almost four years, housing fell by the most in a decade, business investment dropped sharply for a second straight quarter, and domestic demand posted its largest decline since 2015.
Until recently, the economy had been doing relatively well even in the face of higher rates. It grew by a Group-of-Seven-best 3 per cent in 2017, and expanded at a healthy clip in the first half of last year — prompting the Bank of Canada to press ahead with higher borrowing costs. Business investment also disappointed, with non-residential capital spending down an annualized 10.9 per cent — the third straight quarterly decline and the second consecutive drop of more than 10 per cent. Residential investment also contracted for a second straight quarter, down an annualized 14.7 per cent, the biggest drop since 2009.
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