Canada economy slows in January, factories strong

Fri Mar 30, 2012 10:44am EDT
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By Louise Egan

OTTAWA (Reuters) - Economic growth in Canada slowed in January after a sharp jump in December as strength in manufacturing and financial services was offset by a decline in natural gas extraction.

The very modest growth reported by Statistics Canada on Friday, however, did little to change market expectations that first-quarter growth overall will be around 2 percent or slightly higher, above the Bank of Canada's latest projection of 1.8 percent.

Gross domestic product inched up just 0.1 percent in January, in line with market expectations, after showing a bigger growth spurt in December than had first been reported. Statscan revised its estimate for December growth to 0.5 percent from the 0.4 percent it had estimated initially.

There had been a chance the January GDP data could have been even softer after earlier figures showed manufacturing shipments and exports faltering in the month.

"Modest January real GDP growth is good news given that previous reports flagged some downside risk," said Robert Kavcic, economist at BMO Capital Markets.

"Overall, though, our views of the Canadian economy and Bank of Canada policy remain unchanged at this point," he said.

Quarterly GDP growth, as calculated by Statscan last month, slowed to an annualized 1.8 percent in the fourth quarter from 4.2 percent growth in the third.

A Reuters poll of Canada's primary securities dealers on March 23 forecast that the central bank would hold interest rates steady at 1.0 percent until the third quarter of 2013 as it continues efforts to stimulate the economy.   Continued...

Outerwear ready for shipping is seen packed in boxes on the manufacturing floor of Canada Goose's facility in Toronto January 17, 2012. REUTERS/Fred Thornhill