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Data released on Monday showed real GDP in Canada contracted 0.1% in October.  National Bank of Canada analyst Krishen Rangasamy points out the Canadian economy suffered the first output contraction in eight months in October, with the service sector offsetting goods sector softness.  

Key Quotes:

“Canada’s real GDP fell 0.1% in October, taking the three-month change in output to just 0.3% annualized.”

“On a year-on-year basis, Canada’s GDP was up 1.2% in October, with gains in services (+2.0%) more than offsetting declines in the goods sector (-1.1%).”

“October’s GDP decline disappointed consensus which had been expecting no change in output. That said, the report isn’t as bad as suggested by the overall drop in output. Note that the majority i.e. 13 of the 20 broad industries registered output gains during the month. The resilience of the services sector, with an eighth consecutive increase in output, is reassuring because it’s a reliable source of support helping the economy offset a struggling goods sector amid external shocks ─ the weak global economy and GM strike stateside.”

“We expect Q4 Canadian GDP growth to decelerate to around 1% annualized. Even then, that won’t prevent Canada from achieving a near-potential annual GDP growth rate of roughly 1.7% in 2019, i.e. two ticks higher than what the Bank of Canada had estimated in its last Monetary Policy Report.”