The blaze that tore through the oilsands helped cause the deepest one-month decline in Canadian GDP in more than seven years
On Friday, Statistics Canada’s latest reading for real gross domestic product revealed the extent of the economic damage caused by the blaze that roared through the heart of oilsands country.
The dip in the economy was larger than expected. Economists had predicted real GDP to recoil by 0.4 per cent, according to Thomson Reuters.
The fires led to the evacuation of Fort McMurray, shut down key crude operations and crushed economic growth prospects for the second quarter. They also destroyed more than 2,000 structures.
Statistics Canada said the decline in real GDP for May was largely due to a 22 per cent drop in non-conventional oil extraction, the sector’s lowest level of output since May 2011. Excluding the decline in non-conventional oil extraction, real GDP still moved backwards in May by 0.1 per cent.
The agency said the disaster was the main cause of a 2.8 per cent drop in the output of all goods-producing industries.
Manufacturing output was also hurt. The industry was knocked back 2.4 per cent in May in large part due to a 15 per cent drop at petroleum refineries, which was created by a shortage of crude oil.
The May real GDP reading follows a slim economic growth reading of 0.1 per cent in April and contractions of 0.2 per cent in March and 0.1 per cent in February.
Earlier this month, the Bank of Canada predicted the fallout from the wildfires would fuel a contraction of one per cent in the second quarter, a period that includes April, May and June.
The central bank estimated the fires trimmed 1.1 percentage points from second quarter growth. In April, before the wildfires, the bank had forecast the economy would grow in the second quarter by one per cent.
Looking forward, however, the bank also predicted a “marked rebound” in the third quarter thanks in part to the resumption of oil production and rebuilding efforts in the region. It projected third quarter growth to reach 3.5 per cent.
The bank said it also expects that third quarter bounce back due in part to the federal government’s measures to enhance child benefits, which will support household consumption, and its commitment to boost infrastructure spending.