Reeling from low oil prices, Canada fell into a recession in the first half of the year, government data confirmed Tuesday, putting Conservative Prime Minister Stephen Harper on the defensive in the run-up to October elections.
According to Statistics Canada, the economy contracted 0.5 percent in the second quarter after retreating 0.8 percent in the previous three months.
It (Other OTC: ITGL - news) is Canada's second recession in seven years and it is the only Group of Seven nation in economic retreat. The figures are the weakest since the 2008 global financial crisis.
The data reflects fears about the health of the global economy as more gloomy evidence emerged of a slowdown in China, a main engine of growth worldwide.
Harper, whose Tories are trailing their rivals in opinion polls ahead of the October 19 election, blamed the overseas turmoil for Canada's woes, and emphasized an expansion in the economy in June.
"We are living, once again, in a time of ongoing global economic instability," Harper said.
"Obviously there has been challenges, particularly in the energy and some commodity sectors because of falling prices. But the fact of the matter is over 80 percent of the Canadian economy has been growing."
Canada, the world's fifth-largest oil producer, has been hit particularly hard by the halving of world oil prices from above $100 last year.
In the second quarter, its mining, quarrying and oil and gas extraction sector posted a "notable decrease" for a second consecutive quarter, said the government statistical agency.
Analysts said the damage however could be limited.
"Despite the weak start to the year, there is good reason to believe that the worst is over," said TD economist Brian DePratto.
DePratto cited the sharp increase in GDP in June, "providing positive momentum to start the second half of the year." He predicted a "sharp rebound" in the third quarter with growth reaching 2.5 percent by year's end.
- Harper under fire -
On the campaign trail, where the economy has dominated the debate, opposition parties pounced on the grim data, urging voters to send the Tories packing.
"Under Stephen Harper, this has been Canada's lost decade," leftist New Democratic Party candidate Andrew Thomson told a press conference in Ottawa.
"Ten years of job losses, continued crumbling of infrastructure, tax breaks for the wealthy and a situation where the middle class continues to struggle to get ahead, 150 billion dollars in new debt and two recessions -- people are telling us they have had enough."
Thomson -- whose critiques were echoed by the Liberals -- said the Conservatives' stewardship of the economy has been a failure.
"We need to bring change to Ottawa," he said.
Harper has insisted that, oil aside, the rest of the economy is doing well, although the figures point to broad declines in a third of sectors.
At a steel plant in Hamilton, Ontario, he urged voters to support his party's leadership, saying he had "the proven experience to keep us safe and keep our economy moving forward."
- Business investment down -
In the second quarter, business outlays for machinery and equipment, communications and audio and video equipment, furniture, fixtures and prefabricated structures, and intellectual property products fell.
New (KOSDAQ: 160550.KQ - news) housing construction decreased, but this was mitigated by an increase in renovations and strong resale activity, according to Statistics Canada.
Canadians also bought more cars and trucks, insurance and financial services, as well as food, beverages and accommodation services in the period.
Overall, exports edged up 0.1 percent after decreasing 0.3 percent in the first quarter. Imports declined 0.4 percent.