WRAPUP 1-Canadian economy weak in 4th quarter, shrinks in Dec

Fri Mar 1, 2013 11:27am EST
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* Economic growth sluggish for second straight quarter

* December GDP contracts 0.2 percent

* Manufacturing PMI points to pickup in February

* Bank of Canada may soften hawkish stance further

By Louise Egan

OTTAWA, March 1 (Reuters) - Canada's economy sputtered in the final quarter of 2012 as businesses sharply cut back inventories, resulting in the weakest six months since the 2008-09 recession, Statistics Canada data showed on Friday.

The report also showed the economy shrank in December, and the slowdown will likely add pressure on the Bank of Canada to keep stimulus in place for longer and weigh on the Conservative government as it prepares its next budget.

Gross domestic product expanded by 0.6 percent, annualized, Statistics Canada said, as shrinking stockpiles and a battered manufacturing sector offset strong consumer spending and increased business investment. The growth rate was in line with recently reduced forecasts.

"The key thing to note is a general theme of softness in all sectors of the economy, but it is encouraging to note that at least we did see a bounce back in business investment following the decline we saw in the third quarter," said Mazen Issa, a macro strategist at TD Securities.   Continued...