Canada’s Economy Hit by Drop in Oil Sands Output

This article was last updated on April 16, 2022

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Figures revealed by StatsCan indicate a steep decline in the oil sands output that has consequently resulted in a slower-than-expected impact on the monthly growth of Canadian economy, i.e. 0.2 per cent in May. Economists had previously predicted a 0.3 per cent growth in May, however it is now alleged that May’s feeble figure might still look good given the adverse effect of Alberta floods and Quebec construction in June.

Chief economist at the Bank of Montreal, Douglas Porter, stated that “June GDP will likely suffer a sizable, temporary drop due to the special factors of the Alberta floods and Quebec construction strike.” Mr. Porter stated that taking everything into account, May was an average and “so-so month” which inclines the economy towards an annualized growth of 1.5 per cent in the second quarter that is anticipated to be a slight improvement from the Bank of Canada’s forecast of one per cent.

The 2.2-per-cent drop in oil and gas output over April has lessened an otherwise pretty good performance by the service sector in May. The output of service sector had exceeded by 0.5 per cent, beefing up to 1.8 per cent growth in retail output. An economist at the Royal Bank of Canada, Dawn Desjardins, commented that the impact of Alberta floods and Quebec construction strike will be reversed in July, and hoped that Canada will also begin profiting from the continuing U.S. recovery. She stated that “we expect Canada’s economy will also benefit from a quickening in U.S. demand that will boost exports leading to a period of above-potential growth.”