Data released today showed that real GDP in Canada fell 0.1% in November, in line with market consensus. According to National Bank of Canada analyst, Krishen Rangasamy, the November’s decline in output confirms the economy is losing momentum.
Key Quotes:
“A giveback was always in the cards in November after the prior month’s sharp gains for production. The goods sector’s weakness was widespread with factories, the oil patch and the construction industry all struggling during the month. Services sector outputwas flat in part due to retail which was again disappointing. Consumers are evidently under pressure due to rising interest rates, fading housing wealth effects and a low savings rate.”
“We’ll have to wait a few more weeks to get Q4 GDP results, but it’s becoming clear that Canada’s economy lost momentum towards the end of last year. Fourth quarter growth is now tracking around 1% annualized, even if we get a small rebound in December.”
“The current quarter, i.e. 2019Q1 is unlikely to be any better considering mandated oil production cuts underway and possible negative spillovers from the U.S. government shutdown (which will hurt Q1 U.S. growth). Canada’s output gap will therefore remain wide, keeping inflation manageable. As such, the Bank of Canada is likely to delay monetary policy normalization.”
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