TORONTO (Reuters) - Canada’s economy grew at an annualized pace of 0.3% in the fourth quarter due to lower business investment and weak international trade, Statistics Canada said on Friday.
December’s GDP rose by 0.3% over November as both goods-producing and services-producing sectors grew.
The headline was bang on, it looked like December growth was a little stronger than what was assumed by markets but I think it’s still safe to say that it was a soft end to the year for the Canadian economy. We can explain some of that away with transitory factors, we had some weakness in the auto sector earlier due to a U.S. auto strike and spillovers to supply chains in Canada, we also had the CN rail strike in November and a temporary shutdown of Keystone pipeline. But I think even excluding those factors it looks like it wasn’t a very strong end to the year for the Canadian economy and that’s obviously prior to any shocks that could still show up in the data from the coronavirus outbreak and rail blockades to date here in 2020.”
“Growth was bang on what (the Bank of Canada) expected. We thought they were likely to cut rates in April before, just because the economy looks like it’s lost some momentum. With the now growing financial market volatility or weakness from the coronavirus and certainly growing risks to the outlook, that just makes cuts more likely. Our base case is still that they won’t cut next week in March but it’s become a nontrivial possibility, certainly.
“There’s not much to take from the Q4 numbers. Those were in line with the BoC’s projections. However, we are quite encouraged by the month-over-month print for December. It gives a little bit more momentum heading into Q1. Obviously, we’ll have some drag from the ongoing real disruptions there. But if the bank was looking to the data for a reason to cut this morning, I don’t think they found one.”
“Overall the number was exactly as the consensus expected, as the Bank of Canada expected... Now of course this entire report is not likely to have much of an impact simply because the world has changed so much in recent weeks... The market will just look at the as-expected headline and move right along.”
“The market pricing has changed dramatically, even overnight. The market sees a much higher chance of the Bank moving next week. Officially we would not have them cutting next week, but we do think it’s a matter of time now.”
Reporting by Nichola Saminather, Fergal Smith and Moira Warburton; Editing by Denny Thomas