Declines in Canada’s mining and oil sectors took a toll on the economy in November as the nation’s gross domestic product defied analyst’s expectations and shrank 0.2%.
Despite increasing 1.8% in October, mining and quarrying output fell 2.5% in November following declines in iron ore, potash and coal production, according to data released by Statistics Canada January 30.
B.C. is home to Canada’s mining sector and its immediate neighbour to the east was hard hit by declines in its own commodity rich sectors.
Oil and gas extraction went down 0.7% in November following a 3.5% increase in September and a 1.7% bump in October.
BMO chief economist Douglas Porter also said the fall in GDP was below expectations.
“The main drag (in November) was in essentially the two export sectors of the economy, manufacturing and mining (including energy). While we were looking for declines in both, the drops were more intense than anticipated,” he wrote in an investors’ note.
He added the decline in manufacturing, which fell 1.9%, was unexpected in the wake of the Loonie’s drop in value.
“This was not supposed to happen — manufacturing should be the sector that benefits the most from the lower (Canadian dollar), rising U.S. activity and lower energy costs. So far, manufacturing is disguising its positive attributes very effectively.”
TD senior economist Randall Bartless also said the 0.2% decline was "well below" market expectations of a 0.1% increase in November.
“While an outright decline in GDP in November came as a surprise, data throughout the month had suggested that weakness was to be expected,” he wrote in a note to investors.
“If anything, it is the sharp decline in mining, quarrying, and oil and gas extraction that was most unexpected, as the price of a barrel of West Texas Intermediate was still around US$76 in November – well above the sub-US$45 print as of this morning.”
