Canadian economy grew 0.3% in January, beats expectations [UPDATED]
The growth came as 18 of 20 industrial sectors moved higher
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OTTAWA—The Canadian economy returned to growth to start the year after contracting in November and December as broad-based growth led by the manufacturing and construction industries offset weakness in the resource sector.
Statistics Canada said Friday real gross domestic product grew 0.3 per cent in January.
Economists on average had expected no growth for the month, according to Thomson Reuters Eikon.
“There are no two ways about this one, as it was quite simply above everyone’s expectations,” said Doug Porter, chief economist at the Bank of Montreal.
“This nice gain augurs very well, given that Alberta’s oil production cuts were viewed as the biggest drag on the economy at the start of the year, and growth sailed right through that headwind.”
The growth came as 18 of 20 industrial sectors moved higher.
Goods-producing industries increased 0.6 per cent, led by growth in manufacturing and construction. The manufacturing sector rose 1.5 per cent in January, while the construction sector grew 1.9 per cent, its best showing since July 2013.
Services-producing industries rose 0.2 per cent as all but one sector increased.
The better-than-expected result for January came after the economy ended 2018 on a weak note.
Growth in the fourth quarter of 2018 came in at an annualized pace of 0.4 per cent, its worst showing in two and a half years.
The weakness prompted economists to raise concerns about the strength of economic growth this year, while the possibility the Bank of Canada may even look to cut interest rates this year was also raised.
The Bank of Canada kept its key interest rate on hold in its rate announcement earlier this month, but did warn Canadians on of a weaker economic performance in the months ahead.
Weakness in the report Friday could be found in the mining, quarrying and oil and gas extraction sector that pulled back 3.1 per cent.
Oil and gas extraction fell 2.6 per cent, due in part to Alberta’s imposition of oil production cuts that began at the start of the year.
Mining, excluding oil and gas, fell 4.0 per cent.
CIBC chief economist Avery Shenfeld said Friday he’s expecting a more modest gain in February, but noted his bank is raising its first-quarter GDP forecast to 1.3 per cent from 0.5 per cent.
“If that’s on the mark, it’s not slow enough to prompt a Bank of Canada rate cut, but neither is it quick enough to justify a further monetary tightening,” he said.
“Markets had been piling on bets that the Bank of Canada would be pushed into an ease, and today’s data were seen as making that less likely.”