April rebound may stave off Canadian recession

June 30, 2008
Financial Post
Written by: Drew Hasselback

Canada's economy rebounded into positive territory in April, a jolt of economic good news that suggests the country has eased back from the brink of a technical recession.

Canada's real gross domestic product grew 0.4% during April, Statistics Canada reported on Monday. The growth reverses the monthly declines in February and March that raised recession fears.

The April rebound increases chances data will eventually show that Canada's economy grew during the second quarter ended June 30, though that quarterly data that won't be available until Aug. 29.

A positive second quarter would also reverse the 0.3% drop in economic output that hit the country in the first quarter and put to rest fears of a formal recession, which is defined as two consecutive quarters of economic decline.

Economists had expected the economy to bounce back in April, but at 0.4% the rebound was stronger than the 0.3% economists were looking for.

The news is not all rosy. "The pace of growth in the second quarter, though positive, is not likely to be particularly robust indicative of some restraining factors, such as a weak US economy, being more long-lived," said Paul Ferley, assistant chief economist with Royal Bank, in a note.

Douglas Porter, economist with BMO Capital Markets, added that a recent slide in consumer and business sentiment since the beginning of April suggests second quarter growth wiill be limited. "We continue to look for GDP growth of just under a 1% annual rate in the second quarter following the small dip in the first quarter, and not much better in the third quarer," he said in a note. "If anything, the risks for second-half growth in North America remain squarely tilted to the downside amid rampaging oil and gas prices."

StatsCan said manufacturing, retail and financial sectors led growth during April, while the construction and energy sectors experienced set backs.

The rebound in manufacturing and retail is especially significant, as those sectors were significantly held back during the first quarter by a slow down in the auto sector and severe weather that kept consumers from stores.