Canada’s economy shrank 1.4 per cent in the first three months of 2009, the biggest quarterly contraction since 1991, but not as bad as many forecasters had predicted.

On an annualized basis, it amounted to a 5.4 per cent decline in the gross domestic product. Many forecasters had warned of a record-setting number as high as nine per cent, and even the Bank of Canada had pegged the economy shrinking a massive 7.3 per cent.

But a better-than-expected February and March showed there was more than just talk behind speculation that “green shoots” were starting to appear on the barren landscape.

The economy now appears to be bottoming. The worst appears to have occurred several months ago, during the truly dark days of the recession in November, December and January.

But economists with the Bank of Nova Scotia cautioned against too much optimism, pointing out the first-quarter decline was broadly based and was still the worst since 1991.

Goods-producing sectors crashed 15 per cent with all sectors retreating and motor vehicles and parts accounting for half the decline.

Construction fell 13 per cent, while services contracted a much more moderate two per cent, largely as a result of the strength in the public sector and finance, insurance and real estate offsetting substantial fall-offs in services such as wholesale trade.

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