Slump in auto sector stalls Canada economy

Canada's economy stalled in April, setting the stage for a weak second quarter, as supply disruptions caused by Japan's earthquake and tsunami triggered a slump in the key auto manufacturing sector. Gross domestic product (GDP) was unchanged in April following 0.3 per cent growth in March, Statistics Canada said on Thursday. Analysts surveyed by Reuters, on average, forecast a 0.1 per cent decline in April GDP. Mining sector strength contributed to the slightly stronger-than-expected number. But it was still the second worst monthly performance since September 2010, slightly better than the 0.1 percent contraction in February. "There was an outsized gain in mining that helped cushion against declines in manufacturing, wholesaling, and financial services," Avery Shenfeld, chief economist at CIBC World Markets, wrote in a note to clients. Article continues below "Overall, better than expected but obviously not a good reading in absolute terms, and we expect May to show similar softness." Service-producing industries remained flat as strong consumer spending offset declines in wholesale, fin-ance and insurance. "This data point confirms the well-known belief that the second quarter of the year will be quite weak. Our most recent forecast pegs the expenditure-based measure of annualised quarterly growth at just 1.3 per cent," David Tulk, chief Canada macro strategist at TD Securities, wrote in a research note. "Looking further into the future, the real story will be the magnitude of the rebound over the second half of the year." Analysts said the report's market impact was overshadowed by Greek political developments and the release of disappointing US jobless claims data. The Canadian dollar held stronger, trading at C$0.9670 to the US dollar.