World Economy

Wildfires Drag Canada’s May GDP Down to Lowest in 7 Years

Wildfires Drag Canada’s May GDP Down to Lowest in 7 YearsWildfires Drag Canada’s May GDP Down to Lowest in 7 Years

The Alberta wildfires torched the Canadian economy in May, driving the country into its worst one-month performance since the darkest days of the Great Recession seven years ago.

On Friday, Statistics Canada’s latest reading for real gross domestic product showed a contraction for the month of 0.6%, a number that revealed the extent of the economic fallout caused by the blazes that roared through the heart of oilsands country.

The dip in the economy was a little deeper than expected. Economists had predicted real GDP to recoil 0.4%, according to Thomson Reuters.

The number, Canada’s worst monthly figure since real GDP fell 0.8% in March 2009, supported the already-dismal growth prospects for the second quarter.

The wildfires led to the evacuation of Fort McMurray, destroyed more than 2,000 structures and shut down key crude operations.

The decline in real GDP for May was largely due to a 22% drop in non-conventional oil extraction, which Statistics Canada said was the sector’s lowest level of output since May 2011.

The agency said the disaster was the main contributor to the 6.4% drop in the overall natural resources sector and the 2.8% decline in the output of all goods-producing industries.

Manufacturing output was also hurt. The industry was knocked back 2.4% in May in large part due to a 15% drop in output at petroleum refineries, which was created by a shortage of crude oil.

 Disappointment in Several Sectors  

Even without the negative consequences of the fires, the economy still had disappointing results in other sectors.

Excluding the decline in non-conventional oil extraction, real GDP moved backwards in May by 0.1%, Statistics Canada said.

Canadian Imperial Bank of Commerce chief economist Avery Shenfeld pointed to a weakness in capital spending by businesses, a letdown in exports and a decline in construction.

“There were fires raging in Alberta, but the rest of the economy wasn’t so hot,” said Shenfeld. But he suggested the feeble number for May should be put into perspective.

The May headline number for real GDP followed a slim economic growth reading of 0.1% in April. Before that, the Canadian economy limped through contractions of 0.2% in March and 0.1% in February.

After growing at a sturdy annual rate of 2.4% in the first quarter, the economy is widely expected to churn out a significantly worse result in the second quarter.