MNI 5 THINGS:Canada GDP Seen Undershootng BOC,Show Energy Toll

By Yali N'Diaye        

     OTTAWA (MNI) - Statistics Canada will release the December GDP by industry

and fourth quarter GDP reports Friday. Ahead of the releases, we highlight five

themes for particular attention:           

     - Analysts in a MNI survey expect GDP to be flat in December, handing a

weak start to the first quarter, with forecasts ranging from -0.1% to +0.1%. GDP

contracted 0.3% in November as manufacturing, construction and energy weighed on

the output of goods-producing industries. Services were flat.

     - A 1.2% drop in real manufacturing sales on lower petroleum and coal

products is expected to dampen the performance of goods-producing industries in

December. 

     - In services, a 2.5% decline in existing home sales is also expected to

weigh. However, gains in real wholesale sales (+0.3%) and real retail sales

(+0.2%), are expected to bring some offset.

     - Analysts expect real GDP to grow at an annualized rate of 1.0% in the

fourth quarter, with forecasts ranging from +0.9% to +1.4%, undershooting the

Bank of Canada's 1.3% projection. However, the underperformance is unlikely to

be enough to change the central bank's willingness to bring its policy rates to

neutral over time. It should, however, reinforce the lack of urgency to do so.

     - While net exports and business investment are expected to bring a

positive contribution, their growth pace could prove disappointing at a time

they are expected to carry more weight as engines of growth as household

spending is losing momentum. Voluntary oil production cuts could weigh on the

fourth quarter performance, as well as housing, which was already a drag in the

third quarter, when residential investment fell 1.5%. The BOC expects a further

growth slowdown in the first quarter, and it remains to be seen whether the soft

patch will prove temporary. A 1.0% annualized GDP growth would be half of the

third quarter's 2.0% rate.

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

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