Canada 1Q GDP 0.4%, Below Analysts Expectations of 0.7%>

By Greg Quinn

     OTTAWA (MNI) - Canada's economic growth lagged expectations in 

the first quarter as weak foreign trade countered gains in 

consumer spending and business investment. 

     Gross domestic product grew at a 0.4% annualized pace, while 

analysts in a MNI survey had expected a 0.7% increase.  

Statistics Canada also lowered the fourth-quarter 2018 growth estimate 

to 0.3% from 0.4%.

     The report confirms the ``detour'' Bank of Canada officials said 

the economy took late last year, and the two quarters combined are the 

slowest growth since an oil crash in early 2015. Policy 

makers held their key rate at 1.75% Wednesday and said there's evidence 

the economy will gather speed later this year. Statistics Canada's 

report Friday showed the first quarter ended on a positive note with a 

March gain of 0.5%, the fastest since last May and ahead of forecasts of 

0.4%. 

     The first quarter figures showed a divide between healthy 

domestic demand that boosted consumer spending by 3.5%, the fastest 

in almost two years. Business investment rebounded with a 3.6% rise, 

following three previous consecutive declines. Canadian spending on 

imports also rose 7.7%, a drag on growth.

     Exports were the other main source of weakness in the first 

quarter, with a 4.1% drop that was the fastest since the third 

quarter of 2017. Crude oil and farm products led the decline, in 

part because of transportation bottlenecks. 

     Another area the Bank of Canada is watching is business 

inventories, because they could be sign of products that are hard to 

sell. Inventories climbed C$17.7 billion in the first quarter, the most 

since the third quarter of 2017. 

     The March GDP gain included 16 of 20 industries tracked by 

Statistics Canada, including a 2.0% rise in oil and gas 

extraction that followed six previous consecutive declines. 

Energy production increased as the province of Alberta scaled 

back production cuts it mandated after prices tumbled.

     --MNI Ottawa Bureau; email: greg.quinn@marketnews.com 

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