March 29, 2018 / 12:40 PM / 2 years ago

UPDATE 1-Canadian economy unexpectedly shrinks by 0.1 pct in January

(Adds details of release, background)

OTTAWA, March 29 (Reuters) - The Canadian economy unexpectedly shrank by 0.1 percent in January, Statistics Canada data indicated on Thursday, in a clear sign that first-quarter growth is likely to be weaker than the Bank of Canada had predicted.

Analysts in a Reuters poll had expected gross domestic product to increase by 0.1 percent after a revised 0.2 percent gain in December. January’s drop was the first since a 0.1 percent decline in August 2017.

In January, the central bank forecast first-quarter annualized growth of 2.5 percent, but it looks set to cut that estimate when it issues updated numbers on April 18.

The output of goods-producing industries fell by 0.4 percent in January from December as unscheduled maintenance shutdowns at some oil facilities helped cut non-conventional extraction by 7.1 percent.

Real estate and rental and leasing declined by 0.5 percent in January, when tougher mortgage lending rules, designed to damp down hot housing markets, took effect.

The Bank of Canada - which is worried about housing and high levels of consumer debt - has raised interest rates three times since last July and says future hikes will be heavily dependent on economic data.

Reporting by David Ljunggren; Editing by Bernadette Baum

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