January 22, 2019 / 5:43 PM / in 9 months

WRAPUP 1-Canadian factory sales slump, adding to evidence of slower growth

 (New throughout)
    By Fergal Smith and Dale Smith
    TORONTO/OTTAWA, Jan 22 (Reuters) - Canadian factory sales
and wholesale trade both slumped more than expected in November,
supporting the Bank of Canada's gloomy short-term forecasts for
the economy which have sidelined prospects of further interest
rate hikes over the coming months.
    The central bank has said that low oil prices, which have
led to production cuts in Alberta, and a weak housing market
will harm the economy in the fourth quarter of 2018 and the
first quarter of this year.             
    The price of oil, one of Canada's major exports, plunged as
much as 45 percent between October and December before paring
some of its decline in recent weeks.
    "Manufacturing and wholesales confirm the well-anticipated
oil hit to Canada's economy in Q4," said Ryan Brecht, a senior
economist at Action Economics.
    Brecht expects GDP to decline 0.1 percent in November and
for fourth-quarter growth to slow to 1.2 percent annualized,
slightly less than the 1.3 percent that the Bank of Canada has
forecast.
    Canadian factory sales were down 1.4 percent in November
from October on lower petroleum and coal product sales,
Statistics Canada said. Analysts had forecast a decrease of 0.9
percent.              
    "The release confirms the moderating growth narrative, one
that has been reinforced by other disappointing releases,
including the recent international trade data and today's
wholesale trade data," Omar Abdelrahman, an economist at
Toronto-Dominion Bank, said in a research note.
    Separate data from Statistics Canada showed that Canadian
wholesale trade decreased by 1.0 percent in November from
October, as weaker sales in the machinery, equipment and
supplies subsector led the decline. Analysts had forecast no
change.             
    Earlier this month, data showed that Canada's trade deficit
widened in November to C$2.06 billion ($1.54 billion), as both
imports and exports fell.             
    Still, some impediments to Canada's economy, such as oil
production cuts, could prove temporary.
    "As these shocks fade, manufacturing sales should receive
support from strong economic performance south of the border, a
weaker loonie, and expectations of increases in investment
spending in the face of elevated capacity constraints,"
Abdelrahman said.
    The Canadian dollar          weakened on Tuesday to its
lowest intraday level in more than two weeks at 1.3354 to the
greenback, pressured by the weaker-than-expected data and
investor worries about the outlook for the global economy.
            

($1 = 1.3334 Canadian dollars)

 (Reporting by Dale Smith in Ottawa and Fergal Smith in Toronto;
Editing by Andrea Ricci)
  
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