World Economy

Canada Economy Stalls

Canada Economy StallsCanada Economy Stalls

Canadian economic growth stalled in October, struggling soon after emerging from recession, as a rebound in the oil and gas sector was offset by declines in manufacturing and retail activity, data from Statistics Canada showed on Wednesday.

Gross domestic product was unchanged for the month, falling short of forecasts for a gain of 0.2%. The unchanged reading followed an unrevised 0.5% decline in September, FXStreet reported.

The Canadian economy was in a mild recession in the first half of the year, hit by the shock of cheaper oil, a major export for Canada. Although growth resumed in the third quarter, the final quarter of the year has gotten off to a weak start.

Activity in the oil and gas extraction sector rose by 0.8% in October, recovering from a sharp drop in September after some production difficulties and shutdowns.

But that was offset by a 0.3% decline in manufacturing and a 1.4% drop in the utilities sector due to declines in natural gas distribution.

The retail sector also dragged, falling 0.4%, with sales declines seen at food and beverage stores. The transportation and warehousing services group also fell 0.4% due to decreases in pipeline and truck transportation services.

Mining, quarrying, and oil and gas extraction sector saw an improvement. However, the gains were offset by declines in manufacturing, utilities and construction.

The output of service-producing industries remained unchanged in October. The public sector (education, health and public administration combined) increased, but this was again offset by declines in retail and wholesale trade, transportation and warehousing services and, to a lesser extent, the finance and insurance sector.

Retail sales were up 0.1% in October to $43.4 billion. The figures stayed below the 0.5% increase expected. Sales were up in 7 of 11 subsectors, representing 59% of retail trade. After removing the effects of price changes, retail sales in volume terms declined 0.3%. Higher sales of clothing and footwear contributed to increase in sales at clothing and clothing accessories stores (+1.9%), sporting goods, hobby, book and music stores (+4.9%), as well as general merchandise stores (+0.6%).

Canada’s economy didn’t grow in October, and that has analysts wondering if the central bank could be eyeing another cut to a key lending rate.

CIBC Capital Markets economist Nick Exarhos said the weak results undercut expectations that the Canadian economy had rebounded in October after shrinking in September.

The Bank of Canada claims the Canadian economy is well diversified and that  2016 is the transition year—to prove that other parts of the economy can offset the energy sector woes.

Canadian economic growth in 2016 should be better than in 2015, but 2017 is looking even better. As the economy says good-bye (and good riddance) to 2015, the incoming year is about transition—assuming it doesn’t get hit with another shock.