Canada’s economy took a pause in October, with gross domestic product unchanged from the previous month.

Statistics Canada says goods-producing industries were down 0.4% from September figures and service-producing industries were up 0.2%.

Compared with October 2016, Canada’s GDP was up 3.4% overall.

The agency says nine of the 20 industrial sectors that it monitors expanded in October, including manufacturing, wholesale trade and the retail sector.

However, the agency said oil and gas extraction declined along with non-metallic mineral mining.

There were also contractions in the construction, rail transportation and pipeline transportation sectors.

What it means for interest rates

“Yesterday’s upside surprises on retail sales and inflation were countered by this morning’s monthly GDP numbers showing a slow start to Q4,” says Josh Nye, economist for RBC Economics, in a research note.

“As was the case in the summer when the economy appeared to hit a soft patch, temporary shutdowns in one industry were responsible for some of October’s weakness.”

Read: Gas pushes inflation past BoC target for November

Nye says GDP growth “has clearly shifted to a slower trend,” with Q4 growth likely to come in “closer to Q3’s 1.7% increase than the Bank of Canada’s 2.5% forecast.”

Brian DePratto, senior economist for TD Economics, says the data is disappointing. “With nearly all monthly indicators looking healthy, the oil sector threw a wrench in what was otherwise looking like a solid month,” he wrote. “While there remains cause for optimism as several one-off factors reverse, there does appear to be less momentum heading into the fourth quarter than both we, and the Bank of Canada were expecting.”

DePratto predicts a December BoC hike is less likely on the back of slower growth. “That the weakness in October can be put down to specific factors, and that consumer spending remains strong should provide some solace to Governor Poloz. Nevertheless, he may want to see confirmation that October was just a blip before making his next move,” he wrote.

Doug Porter, chief economist for BMO Capital Markets, wrote a song based on the popular jingle about Frosty the Snowman for his Dec. 22 release. See below for an excerpt.

Frosty, the GDP report

“Frosty the GDP report was a jolly lazy soul, (flat vs consensus of +0.2% for October) With zero growth and a boom not close, And two sectors made out of coal (utilities and mining down heavily)

“Frosty the GDP report is a fairy tale, they say, He simply would not grow but economists know how he came to life one day (Q4 still on track for roughly 2.0% a.r.)

“There must have been some magic in that Old wholesale trade they found (Led with +1.4% gains). For when they placed it in this mix, It began to fall aground (Education was also weak due to college strike in Ontario)

“Oh, Frosty the GDP report Was alive as he could be, (which ain’t much, though it was actually +0.01%). And economists say he could laugh And play just the same as you and me (manufacturing was okay at +0.1% even with CAMI strike through mid-month) […].”

Click here to read the whole song.

Originally published on Advisor.ca
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