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Construction activity down, but economists see cause for optimism

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The construction industry in Canada declined again this month, while overall economic activity continues to fall driven by cutbacks in the auto sector and a drop in the oil and gas sector.

The construction industry in Canada declined again this month, while overall economic activity continues to fall driven by cutbacks in the auto sector and a drop in the oil and gas sector.

A Statistics Canada report said construction activity fell by four per cent, which is the fifth consecutive month of decline. “The drops in residential building construction and engineering and repair work eclipsed the increase in non-residential building construction,” said the report.

Real gross domestic product (GDP) fell 0.3 per cent in March and by 1.4 per cent in the first quarter, which is the largest quarterly decrease since 1991.

“The manufacturing sector, pulled down by a 26 per cent reduction in motor vehicle and parts production, accounted for about half of the overall decline in the first quarter of 2009,” said the report.

“The output of the energy sector fell 1.9 per cent in March.

“A significant drop in support activities for oil and gas extraction along with a 1.5 per cent decrease in oil and gas production lowered output in the sector.”

Real GDP declined 0.1 per cent in February, 0.7 per cent in January, one per cent in December and 0.7 per cent in November. Economic activity has declined by 2.4 per cent since October 2008.

TD Bank economist Diana Petramala said the severity of the global economic downturn has taken a real toll on the Canadian economy over the last few quarters.

“We believe that economic activity will continue to contract through the second and third quarter of 2009,” she said.

“However, we believe the worst of the recession is now behind us.”

TD Bank economist Douglas Porter is also hopeful that the worst of the recession is over.

“While it’s awfully tough to put such a deep drop in GDP in a good light, there are some positives here: The decline was well shy of the worst expectations for the quarter, and was not as bad as many other countries in the world (Japan and Germany both had double-digit declines, the U.S. fell 5.7 per cent),” he said.

by Richard Gilbert

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