New gross domestic product reports show Canada and the U.S. are moving towards the worst recession since at least 1991.
In a report released Friday, Statistics Canada said gross domestic product fell 0.7 per cent in November as major sectors across the board reduced production.
The reduction in output of manufacturing, wholesale trade, construction and real-estate agents and brokers were the main factors in the drop.
BNN's Michael Kane said the figures are slightly worse than the 0.5 per cent decline analysts were predicting.
In a commentary, BMO Nesbitt Burns economist Robert Kavcic said November's report will likely be viewed as the breaking point for the Canadian economy this cycle.
"Another weak month can be expected in December -- we already saw 34,000 job losses, and a turnaround in consumer and housing activity is a long shot," Kavcic said.
He said the economy will likely contract by about 3 per cent annualized in Q4, which he called "the sharpest decline since the 1991 recession."
Meanwhile, in the U.S., the economy shrank by 3.8 per cent in the fourth quarter of 2008.
Kane said that number was stronger than the 5.4 per cent contraction that experts had predicted.
"Although it's still causing pain, the situation in the United States is a more steady decline rather than a plunge," Kane said Friday.
However, Scotia Capital economist Derek Holt cautioned that the report included US$6.2 billion in inventory buildup (unsold production).
"The (inventory) gain is most assuredly undesired and waiting to be burned off in future quarters. Rising inventories will amplify the production cutbacks going into 2009," Holt said.
Economists now say the first quarter of 2009 is likely to be the most painful of the recession so far, reports The Canadian Press
November GDP report
Canada's manufacturing sector saw a 2.1 per cent decline in November with 18 of the sector's 21 major groups losing ground.
Wholesale trade, which fell by 3.1 per cent, was pulled down by a drop in domestic and foreign demand. Meanwhile, construction activities dropped 1.2 per cent.
The output of real-estate agents and brokers in the home resale market plunged 12.8 per cent.
"This industry has retreated by about 40 per cent since reaching a peak in the summer of 2007, with about half of this decline recorded in October and November 2008 alone," says the report.
Transportation, energy, retail trade, finance and insurance sectors also decreased.
Still, there were some bright spots in the report with economic activity up slightly for some tourism-related industries, agriculture and the public sector -- which includes health, education and public administration.
Accommodation and food services had a 0.3 per cent increase, as did the agriculture sector.
With files from The Canadian Press
