Canadian gross domestic product grew 0.4% in November after remaining flat in October, according to Statistics Canada data released January 31, but the increase was not enough for analysts to change their forecasts for Q4 growth, which is still expected to be in the 2% range on an annualized basis.
Growth was widespread, seen in 17 of 20 industrial sectors. Goods-producing industries increased 0.8% in the month, compared with a drop of 0.5% in October. The jump was related to growth in the manufacturing, mining and oil and gas extraction sectors. Services-producing industries increased 0.3%, driven by gains in real estate, wholesale and retail trade.
While the rise was encouraging, economists are hesitant to forecast an increase in the Bank of Canada’s overnight rate anytime soon.
“The Bank will undoubtedly be encouraged by today’s report, not least as it confirms their most recent economic growth tracking,” Brian DePratto, senior economist at TD Economics, said in a note to investors.
“Confirmation does not mean a change in view, however, and today’s report does little to change the notion that the balance of economic fundamentals versus risks suggests July is the most likely timing for the next rate increase.”
RBC senior economist Nathan Janzen pointed out that uncertainties around the renegotiation of NAFTA may be weighing down on forecasts for the manufacturing sector, but the outlook is still good.
“Looking through monthly volatility, the GDP numbers add to the evidence that the Canadian economy as a whole continues to grow at a modestly ‘above-potential’ pace, even as it increasingly looks to be operating at or beyond its long-run capacity,” he said.
@EmmaHampelBIV
