OTTAWA — Canadians have reason to breathe a little easier — the economy fell sharply at the start of the year but talk about another depression appears to have been just talk.
Having been given the best economic news in months, Prime Minister Stephen Harper was quick to take advantage Monday, saying the Liberals have no reason to push for a federal election.
“I think the worst is behind us, we will have better quarters going forward,” Harper said in an interview with Toronto radio station CFRB.
“I think that’s one of the reasons (Liberal Leader Michael) Ignatieff seems to be pushing so hard with ideas to get the other parties to bring the government down. He would love the opportunity to get in there for a recovery.”
“The country needs an election like a hole in the head,” Harper added.
The output numbers for the first quarter of 2009 were nothing to boast about. The economy contracted by a massive 5.4 per cent at an annualized rate, the worst in 18 years when there was a 5.9 per cent decline in 1991.
But with the Bank of Canada having projected a 7.3 per cent collapse and some economists saying the decline could be as much as nine per cent, the Statistics Canada data have the feel of a death row reprieve.
And the improving data for the last two months of the quarter — February and March — suggests that as Harper noted, the worst is likely over and it happened during the November-January period.
“It is the worst recession since the Great Depression globally, but this is where some of Canada’s positives have come back to save us a bit from something nastier,” said Douglas Porter, deputy chief economist with BMO Capital Markets.
“Make no mistake, it’s a very severe downturn. But we’ve been through these kinds of severe downturns before in the early ‘80s and early ‘90s.”
Combined with the revised 3.7 per cent drop in the fourth quarter of 2008, Liberal finance critic John McCallum said the slump still qualifies as among the worst since quarterly data began being kept in 1961.
But he too expressed relief that “there is less panic than there was a while ago …and more sense that, ‘Yeah, we are going to get out of this.’ ”
McCallum said his party will still press for improvements to unemployment insurance to ensure that more laid-off Canadians qualify for benefits, saying the economy will likely continue to shed jobs for months to come.
Harper said his Conservative government is “certainly prepared to look at some additional measures if necessary.”
Canada has lost about 321,000 jobs since the beginning of the slump in October.
But the better-than-expected performance is expected to take pressure off the federal government to make substantial changes to employment insurance, or to go beyond the already announced $40-billion stimulus package.
And the Conservative government has been shown to be correct that Canada’s slump, while severe, will be among the mildest in the developed world. Only France did better in the first quarter among G7 countries.
The Canadian stock market was up on the GDP numbers, but also on encouraging signals of a pick-up of activity globally, which helped push commodity shares higher. The Toronto Stock Exchange closed 234 points to the good at 10,604.06.
Porter said there is enough evidence now to suggest that the second quarter decline — the April-June period — will be limited to a annualized rate of minus 2.4 per cent, and that recovery may start sometime in the third quarter rather than the fourth.
But economists with the Bank of Nova Scotia cautioned against too much optimism, pointing out that the first quarter decline was broadly based and was still the worst since 1991.
Goods-producing sectors crashed 15 per cent, while the services decline of two per cent was held in check by strength in the public sector and finance, insurance and real estate.
Business investment in machinery and equipment was down 11 per cent, and corporate profits took a hammering, plummeting 67 per cent annualized in the three months and 34.9 per cent over the year.