Slowing auto sector drives economy into Q1 decline: StatsCan

The Canadian economy shrank at an annualized rate of 0.3 per cent over the first three months of the year, the first such contraction since the second quarter of 2003, Statistics Canada said Friday.

Cutbacks in manufacturing got much of the blame, as a big drawdown in motor-vehicle inventories led to lower auto manufacturing and exports. Bad weather also contributed to the weak first-quarter reading.

Statistics Canada said the economy started to lose momentum in the second half of 2007 as exports declined.

Economists had been expecting first-quarter annualized growth of 0.4 per cent. The Canadian dollar traded lower as traders speculated that the Bank of Canada may be more aggressive in cutting interest rates. The loonie fell by four-tenths a cent to close at 100.70 cents US.