MNI 5 Things: Canada GDP Seen Adding Downside Risk To BOC

--5 Things To Look For In Canada January GDP Report

By Yali N'Diaye

     OTTAWA (MNI) - Statistics Canada will the release the January GDP data on

Thursday morning. Ahead of the release, we highlight five themes for particular

attention:

- ANALYSTS SEE JANUARY GDP BELOW BANK OF CANADA EXPECTATIONS

     Analysts in a MNI survey expect January GDP to edge up 0.1%, the same as in

December, increasing the odds of a first quarter expansion underperforming the

Bank of Canada's 2.5% annualized growth projection. CIBC economists said whether

January GDP comes in flat or as expected at +0.1%, it would still raise the odds

of a sub-2.5% growth over the quarter.

- REAL ESTATE DATA WORTH WATCHING

     With the BOC is closely monitoring the impact of new housing finance rules,

real estate related sectors will be worth paying attention to in January, as

home resales dropped 14.5% on the month. Home purchases had been pulled forward

late last year in anticipation of the tighter mortgage rules in effect since

January. In December, real estate and rental and leasing rose 0.5%. Output of

offices of real estate agents and brokers increased 5.9%, the largest gain since

June 2009. In turn, higher real estate activity boosted professional services,

with legal, accounting and related services up 1.3%. A reversal could be

observed in January, weighing down on the services sector as a result.

- HOURS WORKED GROWTH ANOTHER JANUARY NEGATIVE

     Other negatives for January include a decline in hours worked. According to

the Labor Force Survey data, hours worked for all industries were down 0.6% in

January, led by a 0.7% drop in services, while they were down 0.1% in

goods-producing sectors.

- GDP SEEN DRAGGED BY MANUFACTURING SALES

     In the goods sector, the 1.1% drop in real manufacturing sales is expected

to weigh on GDP. Statistics Canada also reported lower auto production in

January due to "atypical assembly plant shutdowns." At the wholesale level, auto

sales fell 2.4% and at the retail level, new car sales fell 1.6% and existing

car sales dropped 3.0%.

- RETAIL, WHOLESALE SALES TO PROVIDE SOME SUPPORT

     However, there will be positive offsets as wholesale sales volumes rose

0.5% on the month and retail sales volumes edged up 0.1%. Higher oil rig

activity is also expected to bring support. The question is whether such gains

will be enough to offset weakness elsewhere, which most analysts expect it will,

but with a downside risk.

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

[TOPICS: M$C$$$]