The Canadian economy had an unexpectedly weak start to 2014, with unusually severe winter weather hampering spending across the board.
According to Statistics Canada, the gross domestic product grew at an annualized rate of 1.2 per cent in the first quarter. That falls short of analysts' expectations of 1.8 per cent, and is a significant slowdown from the 2.7 per cent growth seen in the fourth quarter of 2013. It's also the smallest increase in over a year.
Winter cast a chill over nearly ever sector.
Business spending, government spending and household consumption all shrank. Consumer spending registered its slowest pace in a year. Housing construction posted its biggest quarterly decline since the recession. There was also a significant drop of 3.4 per cent in the arts and entertainment sector, largely because of the NHL shutdown during the Sochi Winter Olympics.
The resource sector was one of the few in the green, with mining, and oil and gas extraction jumping 2.4 per cent from the previous quarter.
Although sluggish, Canada bore the storm better than its neighbour to the south. The U.S. economy shrank for the first time in three years by a one per cent annualized rate, the Commerce Department reported Thursday.
Still, the Canadian figure is "nothing to write home about," according to Scotiabank vice-president Derek Holt.
At first glance, trade appears strong.
Although exports fell 2.4 per cent, imports were down 7.2 per cent, which translates into GDP growth.
But as BMO chief economist Douglas Porter notes, stripping out that addition from imports "yields a 0.3 per cent annualized drop in final domestic demand — the first such drop since the recession."
The slump suggests Bank of Canada governor Stephen Poloz will remain dovish in his interest rate announcement next week, and indicate to Canadians borrowing rates aren't going up anytime soon.
"Slack remains in the Canadian economy and it doesn't appear to be improving much in the first half of 2014, giving the Bank of Canada plenty of time before it needs to raise rates," says TD economist Leslie Preston.