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“Even before the wildfires will take down May trade figures, net trade is tracking as a large downside risk to the economy in Q2,” the economists wrote in a note to clients. “The risks to our -0.5 per cent Q2 GDP forecast are skewed materially lower with this new information and it would be easy to get a quarterly contraction in the economy at a faster pace than any quarter since 2009.”

The biggest contraction since the financial crisis occurred last year, when Canada’s economy shrank one per cent in the first quarter.

National Bank of Canada expects the the economy will shrink by at least that much this quarter, noting that exports are seeing a sharp decline at a time when imports are growing.

“In other words, expect trade to be a major drag on growth in Q2,” said Krishen Rangasamy, senior economist at National Bank.

The information we have at hand right now is a clear, sharp downside risk to the economy

Friday’s trade deficit is the 20th in a row for Canada. The Bank of Canada has been hoping that a low loonie and cheap fuel prices would lead to a structural shift in the economy, leading to more manufacturing activity and a surge in non-energy exports.

The bank will have to keep waiting, however, as both Holt and Zigler say that it is clear that for whatever reason, Canada’s factories are not ramping up enough to offset the energy price decline.

“Trade numbers are volatile and subject to revision at all times, but the information we have at hand right now is a clear, sharp downside risk to the economy,” the pair wrote.

The data also puts a dent in arguments that Canada’s current economic woes are transitory. Holt and Zigler suggest that perhaps the Bank of Canada has been too optimistic in its tone that a rebound in non-energy exports is right around the corner.