MNI: Canada Q4 GDP Growth Quickens To 1.8% Matching BOC Call
MNI (OTTAWA) - Canada's GDP growth quickened to a 1.8% annualized pace in the fourth quarter to match the central bank's forecast, ending a spell of disappointing gains but with the outlook now threatened by a U.S. trade war.
Statistics Canada's flash estimate Friday improved upon the third quarter pace of 1%. Another helpful sign is the quarter ending with a 0.2% gain in December to rebound from November's 0.2% decline. The final month of a quarter often signals momentum for the following period.
December's preliminary reading showed gains tied to the Bank's interest-rate cuts that began in June, including retail sales, construction and manufacturing. Real estate also gained for the seventh month in a row in November, though StatsCan said there was some housing weakness in December.
Bank of Canada Governor Tiff Macklem slowed the pace of interest-rate cuts to a quarter point on Wednesday after two prior 50bp moves, saying the economy will grow a bit faster than potential over the next two years. Optimism was overshadowed by the Bank's assessment that broad 25% U.S. tariffs could push the economy into recession and put upward pressure on inflation that had just settled at the 2% target. Experts have told MNI a trade war will push Macklem to another jumbo rate cut.
StatsCan underlined the stakes on trade, adding this to its regular report: "The United States continued to dominate the export market, with exports to the US accounting for 17.8% of Canadian GDP and more than 2.4 million jobs in Canada. Oil and gas extraction and transport equipment manufacturing had the highest exposure to the US market, relying on exports to the United States for 74% and 54% of their output, respectively."
Canada is already leading major central banks with six rate reductions to 3% from 5% as the earlier hiking cycle worked faster on the country's highly indebted consumers. Unemployment is also near the highest since 2017 excluding the pandemic, although that slack may be trimmed with the government moving to slow immigration.
Interpreting the November GDP decline is tricky because of weakness tied to strikes at the postal service and seaports that have since ended. There was also a one-off boost to leisure spending from Taylor Swift's concerts in Toronto and Vancouver. Some 13 of 20 industries contracted in November, led by mining and energy.
The flash quarterly figure is based on industry production, making it different from the official number due next month based upon expenditures.