Canada's GDP dropped 3.4% in Q4 of last year year, Canada, dropped, GDP, last

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Canada slid into a deep recession late in 2008, as the economy contracted at an annualized rate of 3.4 per cent in the fourth quarter of the year, Statistics Canada reported Monday.

That is the biggest decline since the recession of 1991 and sparked a sharp drop on the stock market.

The S&P/TSX composite index plummeted about 480 points, or more than five per cent, while the Canadian dollar was down about eight tenths of a cent to 77.73 cents US.

The report also said that Canada's gross domestic product slipped by 0.8 per cent in the fourth quarter of 2008, with the decline increasing progressively with each month.

"Canada's recession began in earnest early in the fourth quarter," Douglas Porter of BMO Capital Markets told the Canadian Press.

"With the weak hand-off, and based on early results from the current quarter, we now expect GDP to drop at roughly six per cent in the first quarter, challenging the first-quarter of 1991 (when GDP declined 5.9 per cent) for the weakest quarterly performance in data back to 1961."

The GDP decline was largely due to slowing exports, capital investments and personal spending -- all symptoms of the current global recession.

While the GDP dropped in October, November and December, the decline was sharpest in December.

"The economy deteriorated at a very rapid rate at that point. In that one month we fell by one per cent. That's a huge one-month decline for any economy," said BNN's Linda Sims.

She told CTV Newsnet that the losses were "across the board" with the only growth in the economy observed in the public sector.

"That means that if it wasn't a government agency or the government itself, it wasn't growing, it was in decline. That means the markets, consumer spending, manufacturing, imports, exports, you name it, were shrinking."

The fact that declines are being posted across all industries makes this one of the most widespread recessions in nearly two decades.

"So this is the first time where it's really starting to hit everywhere at the same time," Colin Cieszynski of CMC Markets Canada told Newsnet. "So this in a lot of ways is the first major recession we've had in Canada since the early 90s, considering the last one seemed to be more concentrated in a few sectors, such as technology and telecom."

Both domestic and foreign demand for goods declined, which means production fell by 2.4 per cent. All goods-producing sectors posted declines, except for agriculture, including:


manufacturing, which fell by 4.7 per cent
service-producing industries, which were down 0.4 per cent
automotive products, which posted a 19 per cent decline in exports
housing, which crumbled by 22.1 per cent


Statistics Canada also reported that imports to Canada fell faster than exports. However, the decline in the volume of products coming into the country, and going out, were the largest since 1982.

Despite the seemingly dismal numbers, overall in 2008, growth was still positive, with a 0.5 per cent increase to the nation's GDP.

And while Canada's fourth-quarter drop in GDP may sound dramatic, the decline is not as sharp as in the U.S., where a 6.2 per cent decline was registered.

The European Union reported an annualized decline of 5.9 per cent, Mexico's was 10.3 per cent and Japan experienced a massive 12.7 per cent plunge.

Derek Holt, Scotia Capital's vice president of economics, told the Canadian Press that the news will likely lead Bank of Canada governor Mark Carney to cut interest rates by half a point on Tuesday.

That would put Canada's overnight rate at a meagre 0.5 per cent. However, it is unclear if cutting interest rates would have the same stimulative effect as in healthier economic times.