Canada’s economy returned to its sluggish ways in February, with a drop in output that will reinforce expectations of a slow start to the year.

Gross domestic product fell 0.1 per cent, taking back some of the 0.3 per cent gain in January in part due to poor weather, Statistics Canada said Tuesday April 30th from Ottawa. Economists were estimating output would be unchanged. The monthly numbers are in line with the Bank of Canada’s pared back expectations for the quarter. Without any more growth in March, Canada’s economy may have come to another near halt in the first three months of the year, as the central bank is now predicting. Falling resource production was the main culprit in February, with the mining and oil and gas sector down 1.6 per cent — its sixth consecutive drop.

A tough winter in much of the country also played a role in the contraction. This was evident in a 1.6 per cent drop in transportation and warehousing sector, the largest one-month decline for the sector since June 2011. On the flip side, February was a great month for utilities, which saw output jump 1.5 per cent because of the cold.

About half of the sectors tracked by Statistics Canada actually posted gains, with increases also recorded by builders, retailers and wholesalers. While conventional oil dropped, the situation in the oil sands seems to be stabilizing. That sector dropped just 0.1 per cent in February, after a 4.1 per cent drop a month earlier. Manufacturing contracted 0.4 per cent, after a 2.1 per cent gain in January that was the largest in nearly to 15 years.

Bank of Canada Governor Stephen Poloz said that while the Canadian economy currently faced some headwinds, there was good reason to believe growth would accelerate in the second half of this year. Poloz, speaking to the House of Commons finance committee, reiterated that he felt an accommodative policy on interest rates was still warranted.

Last week the central bank made clear rate hikes were off the table for now, given the economy was struggling to cope with lower oil prices, weak household spending and the impact of global trade conflicts. It also cut its estimate for annualized first quarter growth to just 0.3 per cent.

“We will continue to evaluate the appropriate degree of monetary policy accommodation as new data arrive. In particular, we are monitoring developments in household spending, oil markets and global trade policy.”

Source: The Financial Post
Source: The Financial Post