OTTAWA -- Concerns about a possible recession are growing after Statistics Canada said Tuesday that the economy contracted in April, marking the fourth consecutive monthly decline.
Statistics Canada said Tuesday that the country's real gross domestic product, hurt by weakness in the mining and energy sectors, edged down 0.1 per cent for the month.
Economists had expected the country's real gross domestic product to gain 0.1 per cent, according to Thomson Reuters.
"The surprise contraction in April GDP leaves open the probability that the second quarter as a whole could be negative, which would technically put the economy in recession," CIBC senior economist Andrew Grantham wrote.
"Although the Bank of Canada was already very cautious regarding its expectations for growth during the first half of the year in its April monetary policy report, the actual numbers are clearly coming in even worse and could spark concern that the hit from oil isn't as 'front-loaded' as previously assumed."
In its April monetary policy report, the Bank of Canada predicted the economy to grow at an annual rate of 1.8 per cent in the second quarter.
However, economists expect that figure to be revised lower when the central bank updates its forecast on July 15 and some suggest the disappointing result for April raises the chances it will cut its key interest rate later this year.
The Bank of Canada unexpectedly cut its target for the overnight rate in January as insurance against the impact of falling oil prices on the economy.
"The oil shock continues to reverberate through the Canadian economy, in all its various forms," Bank of Montreal chief economist Doug Porter wrote in a report Tuesday.
"This latest growth disappointment -- along with the rumbling uncertainty surrounding Greece -- has simply cranked up the odds of another Bank of Canada rate cut at some point this year, and heaped renewed downward pressure on the Canadian dollar."
Statistics Canada said the decline came as a 0.8 per cent decrease in the output of goods-producing industries outweighed a 0.3 per cent increase by the service sector in April.
Mining, quarrying, and oil and gas extraction contracted 2.6 per cent in April. The utilities, construction, manufacturing, transportation and warehousing, retail sales and finance and insurance sectors also lost ground.
Meanwhile, agriculture and forestry, wholesale trade and the public sector made gains.
Royal Bank assistant chief economist Paul Ferley noted the mining and energy sector was responsible for the lion's share of the drop in April.
"At some point these production shutdowns reverse and activity bounces back, so you make up for lost activity," he said.
"We may see some evidence of that in May. The only caution there is there were some wildfires around some of the production facilities in Alberta that may delay it until June."
Ferley added that there is more to defining a recession than two consecutive quarters of GDP contraction.
"It also has to fairly broad-based," he said.
"Though we're not seeing evidence of low oil prices providing strong lift elsewhere, other sectors seem to be continuing to grow, particularly on the services side of the economy."
