Canada's economy shrank in October on declines in wholesale trade and manufacturing, paving the way for a recession that has been widely predicted by analysts and government officials.
Statistics Canada show that the economy shrank by 0.1 per cent in October from September, less than the 0.3 per cent fall predicted by market analysts.
Year on year, gross domestic product growth was an anaemic 0.2 per cent, the lowest figure since the 0.2 per cent increase recorded in May 1992.
"The decline in October GDP likely marks the start of recession in Canada," said Benjamin Reitzes of BMO Capital Markets Economics.
The technical definition of recession is two consecutive quarters of negative growth.
Ian Pollick, economics strategist at TD Securities, said he expected fourth quarter GDP to contract between 1.5 and 2.0 per cent from the third quarter and to shrink by at least 0.7 per cent from the year-before quarter.
"Either way you slice it, the Canadian economy is beginning to feel the weakness of the global economic slowdown," he said.
Wholesale trade fell by 2.7 per cent in October over September, while manufacturing dropped by 0.7 per cent, as both sectors felt the impact of a slump in the auto sector that is causing more and more pain for Canada.
Weakening demand for housing reduced business for real estate agents and brokers by 14.3 per cent in October, the biggest monthly decline in more than a decade.
On the positive side, the energy sector grew by 1.2 per cent on increased oil and gas extraction, while the finance and insurance sector rose 0.4 per cent due to unusually high trading volume on stock exchanges.
Canada sends 75 per cent of its exports to the US and as such is extremely vulnerable to the growing economic crisis in its neighbour to the south.
"For a small open economy that continues to see the vast majority of its external demand originate out of the US, there is little debate over the economy's inability to decouple itself from the US consumer and the US economic slowdown," said Stewart Hall, an economist at HSBC Securities.
"The expectation is for the economy to decelerate significantly last month and this month," he added, predicting that GDP in the fourth quarter would contract by 2.5 per cent on annualised basis from the third quarter.