The Canadian economy wasn’t expected to turn in a stellar performance in February, certainly not after a “blowout” start to the year. And that’s just about it.
Gross domestic product declined by 0.1% during the month, Statistics Canada said—in line with most economists’ forecasts—following surprisingly strong growth of 0.6% in January, Yahoo reported.
The pull-back in February was led by declines in manufacturing, wholesale trade and the resources sector, ending a string of gains over the past four months.
Overall output had been improving in recent months—increasing 0.1% in October, and by 0.3% in both November and December.
“We have to take this (February data) in conjunction with the blowout number we had in January,” said Douglas Porter, chief economist at BMO Capital Markets.
“Taking those two numbers together still leaves us with pretty decent growth at the start of the year—it’s obviously not the rollicking start we had thought for the economy a month ago,” he said.
“It still looks as if first-quarter GDP is well on track to growth by roughly 3% . . . and, of course, that’s a world away from what we just saw out of the US, with their very meager growth at the start of the year.”
The outlook for Canada’s economy is strongly linked to output in the United States, which is this country’s largest market for exports.
In the first quarter of this year, GDP in the US increased by just 0.5% on an annualized basis—the worst performance since the first quarter of 2014. Canada won’t announce its first-quarter tally until May 31.
“American consumers reined in spending and companies slashed business investment, especially in the energy sector,” said Sherry Cooper, chief economist at Dominion Lending Centers.
Friday’s GDP report is unlikely to nudge the Bank of Canada off its neutral stance on the key interest rate, which is currently at 0.5%.
Monetary policymakers appear to be taking a wait-and-see stance on the economy, as governor Poloz and his policy council continues to monitor the impact of planned fiscal stimulus measures by the federal government.
“The underlying momentum in the economy remains weak, suggesting that after a very strong start to the year . . . growth should moderate in Q2,” said economist Charles St-Arnaud, at Nomura Securities in London.
“We still think the Bank of Canada will keep rates on hold for the rest of the year.”
