Canada: Busy week with Q4 GDP in focus – NBF

According to analysts at National Bank Financial, it’s a busy data week for Canadian economy, with the most important being the release of Q4 GDP on Friday.

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“Monthly readings to date hint at a positive contribution from residential investment (judging from the increase in housing starts in the quarter) and business investment (based on healthy imports of machinery and equipment).”

“Consumption spending may also add to GDP but only to a limited extent considering the stagnation in retail sales volumes during the quarter. Trade, on the other hand, could weigh on the headline growth figure as real imports expanded at a faster pace than real exports in the three months to December.”

“All told, GDP may have expanded 1.2% in annualized terms in the last quarter of 2018. Looking at monthly data, the handoff to Q1 looks decent, with December GDP on pace to expand 0.1% courtesy of gains in the wholesale and retail sectors. The week will also see the release of the consumer price index for January.”

“A drop in gasoline prices, coupled with an expected reversal in the air transportation category following a strong increase the prior month, should translate into a 0.1% monthly drop for the headline index (not seasonally adjusted). This would allow the annual inflation rate to drop 7 ticks to 1.3%. The annual rate of CPI-common, meanwhile, may come in at 1.8%, one tick less than in December. We’ll also keep an eye on the release of Markit’s manufacturing PMI for February.”