Everyone knew that Canada’s first quarter gross domestic product (GDP) numbers were going to be bad. The question was how bad? And what’s in store for the Canadian economy and stocks for the rest of the year? Canada’s GDP tumbled 8% in the first quarter with Statistics Canada warning a bigger drop could be on the horizon.
COVID-19 is behind the cratering of the Canadian economy. In the first quarter, Canada’s economy reported its worst monthly showing since the Great Recession in 2009. First quarter GDP tumbled 8.2% on an annualized basis. For comparison sake, in the U.S, real GDP retracted 5.0%. During March, the last month of the first quarter, GDP was down a whopping 7.2%, making it the worst month for the Canadian economy since record keeping started in 1961.
Most of that economic data is a result of measures taken to combat COVID-19, including the closures of schools and non-essential businesses, travel restrictions, and border closures. It can’t all be pinned on COVID-19, though. The Canadian economy was in rough shape before the pandemic. First quarter GDP was also hampered by weak economic momentum, the Ontario teachers’ strike, and February’s rail blockades.
Virtually the entire Canadian economy took a hit, with 19 out of 20 sectors retracing. There was one exception, utilities, which reported a princely 0.4% gain.
At the other end of the spectrum:
Canada’s first quarter GDP numbers show that the country is in it’s worst recession in decades. And, according to Statistics Canada, it looks like it’s going to get a lot worse in the second quarter.
April’s data is already showing an 11% contraction over March’s already abysmal showing. If current economic expectations hold, March and April 2020 could end up holding the record for having the worst consecutive monthly declines on record.
According to some accounts, Canada’s second quarter GDP could crater an eye whopping 45% on an annualized basis.
There is growing optimism for the back half of the year though, with many economists predicting a rapid “V” shaped economic recovery. Whether that optimism continues, in the face of coronavirus flare ups, ongoing trade tensions between the U.S. and China, and protests across the U.S. (which have shut down local economies), remains to be seen.
Investors may be optimistic, shrugging off bad economic news and sending stocks higher, but the fact remains, Canadian and U.S. GDP data has been terrible, and the second quarter looks like it will be a lot worse. Investors can only reward underperforming stocks with higher valuations for so long. That doesn’t mean investors should sit on the sidelines trying to time the market. The trading professionals at Learn-To-Trade.com can help you profit regardless of whether stocks are going up, down, or sideways
As Canada’s oldest and leading provider of stock market trading courses, Learn-To-Trade.com can teach investors of every skill level how to trade more confidently and profit more consistently. Case in point, Learn-To-Trade.com’s instructors are educators for the Toronto Montreal Exchange, through which its instructors host educational sessions for major banks across Canada.
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