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It's no secret that a massive oil shock and the bitter bite of winter put a chill on the Canadian economy to start the year. This week, we'll get a better idea of just how cold the economy has become.

The week's highlight – or, more accurately, lowlight – will be Tuesday's release of Canada's gross domestic product numbers for January. That was the month when the severity of plunging oil revenues really sank into the budget forecasts for oil companies and governments, when the unemployment rate jumped to a five-month high, when the Bank of Canada decided the situation was perilous enough to warrant a surprise interest-rate cut, and extreme cold and heavy snow bogged down many key regions of North America.

A recipe for a lousy month of economic growth, to say the least.

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Economists' consensus estimate is that real (that is, inflation-adjusted) GDP contracted by 0.2 per cent in January from December – reversing most of December's surprisingly strong 0.3-per-cent month-over-month growth. That's based on economic data released so far for January – particularly in retail sales, wholesale trade and manufacturing – that came in even weaker than economists' already-low expectations. ("Awful" is how National Bank Financial economists summed up the indicators.)

While the prospect of a negative monthly GDP reading is discouraging, it would hardly be a sign of impending economic doom. Canadian Imperial Bank of Commerce chief economist Avery Shenfeld noted that since the last recession ended in mid-2009, Canada has had 12 negative readings in month-to-month GDP, "and none of these were the start of a renewed downturn."

Still, it would mark a rough start to what looks to have been a very trying quarter.

Many economists have been quietly trimming their first-quarter expectations, with recent first-quarter GDP growth estimates coming in at or below an annualized rate of 1 per cent, well below the fourth quarter's 2.4 per cent. Some forecasters believe growth could be near zero.

"While [January] is just a monthly figure, Ottawa's statisticians have been digging a deep enough hole that it will be tough to salvage growth in [the first quarter]," said Bank of Nova Scotia economist Derek Holt.

In a speech in London last week, Bank of Canada Governor Stephen Poloz reaffirmed that he believes the brunt of the oil-slump damage was inflicted on the Canadian economy early in the year, adding that the poor winter weather also put a dent in economic activity.

"I wouldn't want to guess whether we could go all the way down to zero or negative; I just think it's going to be a pretty low-growth quarter," he said. While the central bank hasn't updated its official forecast from its January Monetary Policy Report, which projected annualized growth of 1.5 per cent in the quarter, Mr. Poloz acknowledged that the economic data so far "kind of look on the soft side" of that projection.

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However, he's optimistic that the early-year weakness is evidence that the oil shock "is mostly front-loaded … that what we're seeing are not signs of a larger shock, but an earlier shock," clearing the way for a quicker recovery in subsequent quarters.

For the time being, most economists look willing to go along with Mr. Poloz's interpretation. Recent forecasts point to a second-quarter pace of better than 2 per cent, although the outlooks show a wide range, suggesting considerable uncertainty about the depth and timing of the oil shock's impact. Many forecasters are keeping their cards close to their vests until further economic data provide more clarity.

Mr. Poloz said "we've got our fingers crossed" for the second quarter – not the most reassuring choice of words from a central banker, but likely just the famously casual-speaking Governor's way of saying that his second-quarter expectation is still just an educated guess until we have some harder evidence to back it up. The bank will formally update its economic estimates in its quarterly Monetary Policy Report on April 15.

Another key report this week could shed a bit more light on how the first quarter has evolved: the February international merchandise trade figures, which come out Thursday morning. Economists expect Canada's trade deficit to have narrowed somewhat, to about $1.8-billion from January's $2.5-billion, helped by improving U.S. demand and firmer prices for energy exports. But again, weather will be a major wild card; some of the coldest temperatures of the winter hit in mid-February, and that may have put a temporary crimp in activity on both sides of the border.

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