MNI 5 THINGS: Energy To Weigh on Canada Nov GDP; Weak Services

By Yali N'Diaye        

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

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

attention:     

     - Analysts in a MNI survey expect headline GDP to contract by 0.1%, with

forecasts ranging from -0.2% to +0.1%, despite a 2.1% year-over-year gain in

hours worked over the month. A GDP contraction in November, even after the

stronger-than-expected 0.3% expansion recorded in October, would put the fourth

quarter GDP on a lower track than the 1.3% annualized growth projected by the

Bank of Canada. December would have to prove particularly strong to yield a

growth pace of 1.3%.

     - Within goods-producing industries, data so far points to weakness in

manufacturing in particular. Manufacturing sales fell 1.4% in November, with

volumes down 0.9%. Meanwhile, voluntary oil production cutbacks in response to

persistently low oil prices should weigh on activity in the oil sector. In

October, output in oil and gas extraction rose 3.6%, as it recovered from

maintenance shutdowns in the previous months. The reading of GDP excluding

energy will therefore be particularly important. In October, GDP excluding

energy was actually flat, following a 0.2% gain in September. Production

cutbacks will also weigh on GDP in the coming months as the province of Alberta

imposed production cuts of 8.7% effective Jan. 1, 2019 to boost oil prices. 

     - Services, which rose 0.3% in October, are unlikely to provide much

relief: real retail sales were down 0.4% in November, and wholesale sales

volumes fell 1.2%. Not to mention the ongoing rotating strikes at Canada Post,

which had already taken a toll on postal service and couriers and messengers in

October (-2.3%). Transportation and warehousing output, which decreased 0.3% in

October, should remain a volatile factor in November. Federal government

legislation forced workers to end the strike toward the end of the month.

     - Meanwhile, housing activity has been weakening further, with existing

home sales down 2.2% in November, marking their third consecutive decline. As a

result, activity at offices of real estate agents and brokers could further

decline, after a 1.7% decrease in October. 

     - Amid ongoing financial market volatility, it will also be interesting to

see whether finance and insurance will further benefit. In October, activity in

the finance and insurance sector expanded by 0.9%, owing to higher activity in

bond, money, and stock markets.

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

[TOPICS: MACDS$,M$C$$$]