Oil-Price Collapse Took Bigger Toll on Canada Than First Thought

(Bloomberg) -- Canada’s economy suffered even worse than previously reported from the massive decline in oil prices that began in 2014.

The country’s statistics agency revised down its gross domestic product figures for the last three years, largely reflecting an even bigger growth slowdown in 2015 and 2016. The figures, released Thursday in Ottawa, also show a deeper recession in Alberta at that time.

Statistics Canada lowered the national growth figure to 1.1 percent in 2016, compared with 1.4 percent previously, and to 0.7 percent in 2015, from 1 percent. The new information also shows a wider growth slowdown in 2015, with eight of 13 provinces and territories being revised lower.

The revisions further validate the Bank of Canada’s decision to cut interest rates at the time, and to keep borrowing costs at historically low levels. They also suggest the economy may have had more slack than thought last year when the central bank began to raise interest rates again, but it’s unclear what effect the revisions will have on plans for additional rate hikes, given the economy has shed whatever excess capacity existed at the time.

“Revisions to historical GDP growth don’t change the fact that businesses are reporting labor shortages as the number one impediment to increasing sales or production,” said Nathan Janzen, senior economist at Royal Bank of Canada in Toronto.

More highlights from Canada’s GDP revisions:

  • The data reaffirm 2017 was a year of strong and broad-based growth. The economy expanded by 3 percent (versus an earlier 3.1 percent estimate), with every province and territory adding to national growth, the first time that’s happened since 2010
  • Alberta’s economy rebounded in 2017 with the best growth rate in the country at 4.4 percent. It shrank 7.7 percent over the prior two years, the second largest two-year decline in a Canadian province in the past four decades
  • In 2017, British Columbia’s economy grew 3.8 percent, while Ontario and Quebec both expanded 2.8 percent, which for Quebec was the fastest pace since 2002
  • National spending on durable goods like cars and furniture rose 7.1 percent last year, the fastest since 2002
  • British Columbia’s 2017 growth included a 30 percent increase in investment in non-residential structures like oil and gas projects. It also included a 0.4 percent decline in residential investment, after seven consecutive years of growth

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