The Canadian economy grew by a surprise 0.1% in November, driven by a boost in utility use because of an unexpected cold snap in central Canada, Statistics Canada data showed on January 31. Analysts in a Reuters poll had forecast no change after an unexpected 0.1% decline in October. Goods-producing industries and the services sectors both posted a 0.1% gain. Increases were reported in 15 of the 20 industrial sectors tracked by Statscan.

The Canadian dollar slightly pared its decline, touching 1.3227 to the U.S. dollar, or 75.60 U.S. cents, after the GDP gain. Royce Mendes, a senior economist at CIBC Capital Markets, said in a note that,“[t]he above-consensus reading was surprising given the temporary factors which were expected to restrain growth – pipeline outage, rail strike, weather – and should limit the downside risk to the Bank of Canada’s Q4 forecast.”

The Bank of Canada, which has sat on the sidelines for more than a year even as several of its counterparts have eased, held its overnight interest rate steady but opened the door to a possible future cut should a slowdown in domestic growth persist. The central bank also cut its fourth quarter annualized growth forecast to 0.3% from 1.3% in October and said it would be closely monitoring developments in consumer spending, the housing market and business investment.

Unseasonably cold weather in central Canada caused utilities to jump 2.1%, the agency said, the largest gain in more than a year. November’s GDP gain came despite notable declines in mining, quarrying and oil and gas extraction, as well as the transportation and warehouse sectors, in part because of an eight-day rail strike at Canadian National Railway, Canada’s largest railway.

Mining, quarrying and oil and gas extraction, Statscan said, fell 1.4%. Meanwhile, temporary mine closures in the Western Canadian province of Saskatchewan because of weak international demand caused potash mining to decline 18.2%. In a separate release, the agency reported on January 31st that Canadian producer prices rose by 0.1% in December on higher prices for non-ferrous metal products.

Statscan said retail trade increased by 0.5%, recouping part of a 1.1% decline seen in October. Motor vehicle and parts dealers were up 2.4%, while Black Friday sales saw mixed results. Electronic and appliance stores posted a 1.5% gain while clothing and clothing accessory stores saw a decline of 1.5%. Sporting goods, hobby, book and music stores were down 1.9%.

Source: Financial Post