Real gross domestic product declined 1.4% in the first quarter, Statistics Canada said Monday. That’s the largest quarterly decrease since 1991, but better than economists had forecast.

Real GDP contracted at an annualized rate of 5.4% in the first quarter. Bay Street economists had forecast a drop of 6.5% in GDP, annualized, compared with the first quarter a year ago.

Real GDP fell 0.3% in March, StatsCan said, adding that “the declines in February and March were less pronounced than those in the preceding three months.”

The March decline was in line with economists’ forecasts.

Both domestic and international demand continued to weaken during the quarter, StatsCan said.

Lower spending in Canada and the United States, particularly business investment in plant and equipment, led to a sharp decline in Canada’s exports and imports during the quarter.

Business investment in Canada fell at the fastest rate since 1982, StatsCan said.

Final domestic demand was down 1.5% as personal spending, particularly on durable goods, continued to decline.

Corporate and personal income also fell in the quarter.

As was the case in the fourth quarter of 2008, lower production of goods — down 4.0% — led the decline in the first quarter of 2009, while the production of services decreased 0.5%. All goods producing sectors retreated.

The manufacturing sector, pulled down by a 26% reduction in motor vehicle and parts production, accounted for about half of the overall decline in the first quarter of 2009.

Wholesale trade and transportation services declined the most among the service producing sectors.

The increases in the public sector (which includes education, health and social services, as well as public administration) helped mitigate the decline in the production of services.

Industrial and raw materials prices slip

Separately, StatsCan said the Industrial Product Price Index and the Raw Materials Price Index were both down 0.5% in April compared with March, halting their upward movements since the start of the year.

The IPPI was mainly pulled down by the appreciation of the Canadian dollar in relation to the U.S. dollar, and the RMPI was affected by lower prices for mineral fuels.

IE