Skip to main content

Economy Canada’s economy contracts in November, hit by postal strike, factory weakness

The Canadian economy contracted as expected in November, adding to evidence of a domestic slowdown after a sharp drop in oil prices, a development that could keep the Bank of Canada on hold over the coming months.

Canadian gross domestic product shrank by 0.1 per cent in November from October, pulled down in part by weakness in wholesale trade, manufacturing and construction, Statistics Canada said.

The decline, which follows a 0.3 per cent increase in October, matched forecasts by analysts.

Story continues below advertisement

“Nothing shocking here after seeing weakness in earlier data for factories, wholesaling and retailing, but consistent with our tracking for GDP for Q4 to be roughly 1 per cent,” said Avery Shenfeld, chief economist at CIBC Capital Markets. “That leaves the Bank of Canada, like the Fed, decidedly on hold for the next couple of quarters.”

The Bank of Canada has said that low oil prices, which have led to production cuts in Alberta, and a weak housing market will slow economic growth in the fourth quarter of 2018 and the first quarter of this year.

The price of oil, one of Canada’s major exports, plunged as much as 45 per cent between October and December before paring some of its decline in recent weeks.

“The Canadian economy had a tough stretch through the latter stages of 2018, and the oil production cuts will make the early 2019 data look soft as well,” said Benjamin Reitzes, Canadian rates & macro strategist at BMO Capital Markets.

Money markets expect the Bank of Canada to leave its benchmark interest rate on hold at 1.75 per cent throughout 2019, after the central bank hiked it five times since July 2017.

On Wednesday, the Federal Reserve signaled its three-year-drive to tighten monetary policy may be at an end amid a suddenly cloudy outlook for the U.S. economy due to global headwinds and impasses over trade and government budget negotiations.

The details of the Canadian GDP data showed that the wholesale trade sector fell by 1.1 per cent on weakness on machinery, equipment and supplies while the manufacturing sector contracted by 0.5 per cent.

Story continues below advertisement

Non-durable manufacturing dipped by 0.3 per cent as output from petroleum refineries fell thanks to maintenance work at some plants. Durable manufacturing fell 0.7 per cent as atypical retooling and production schedules hit motor vehicle assembly.

Rotating strikes at Canada Post contributed to a 0.5 per cent dip in transportation and warehousing while the finance and insurance sector posted a 0.7 per cent decline.

In separate data from Statistics Canada, Canadian producer prices fell by 0.7 per cent in December, their second consecutive sharp month-on-month drop, thanks largely to cheaper energy and petroleum products. Analysts had predicted a 0.2 per cent increase in December after the 0.8 per cent drop in November.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Discussion loading ...

Cannabis pro newsletter