OTTAWA — The Canadian economy wasn’t expected to turn in a stellar performance in February, certainly not after a “blowout” start to the year. And that’s just what we got.
Gross domestic product declined by 0.1 per cent during the month, Statistics Canada said Friday — in line with most economists’ forecasts — following surprisingly strong growth of 0.6 per cent in January.
The pull-back in February was led by declines in manufacturing, wholesale trade and the resources sector, ending a string of gains over the past four months.
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Overall output had been improving in recent months — increasing 0.1 per cent in October, and by 0.3 per cent in both November and December.
“We have to take this (February data) in conjunction with the blowout number we had in January,” said Douglas Porter, chief economist at BMO Capital Markets.
“Taking those two numbers together still leaves us with pretty deceit growth at the start of the year — it’s obviously not the rollicking start we had thought for the economy a month ago,” he said.
“It still looks as if first-quarter GDP is well on tract to growth by roughly three per cent . . . and, of course, that’s a world away from what we just saw out of the U.S., with their very meagre growth at the start of the year.”
The outlook for Canada’s economy is strongly linked to output in the United States, which is this country’s largest market for exports.
In the first quarter of this year, U.S. GDP increased by just 0.5 per cent on an annualized basis — the worst performance since the first quarter of 2014. Canada won’t its first-quarter tally until May 31.
“American consumers reined in spending and companies slashed business investment, especially in the energy sector,” said Sherry Cooper, chief economist at Dominion Lending Centres.
“In Canada, the first quarter story appears to be rosier.”
Friday’s GDP report is unlikely to nudge the Bank of Canada off its neutral stance on the key interest rate, which is currently at 0.5 per cent.
Monetary policymakers appear to be taking a wait-and-see stance on the economy, as governor Poloz and his policy council continues to monitor the impact of planned fiscal stimulus measures by the federal government.
“The underlying momentum in the economy remains weak, suggesting that after a very strong start to the year . . . growth should moderate in Q2,” said economist Charles St-Arnaud, at Nomura Securities in London.
“We still think the Bank of Canada will keep rates on hold for the rest of the year.”