MNI DATA IMPACT: Canada GDP Has 1st Fall in 8M on UAW Strike>

By Greg Quinn and Anahita Alinejad

     OTTAWA (MNI) - Canada's economy shrank for the first time in 

eight months in October as the UAW strike disrupted the auto industry.

     Gross domestic product contracted 0.1% on the month, Statistics 

Canada reported Monday from Ottawa. That matched the MNI economist 

median. 

     Manufacturing was the biggest drag with production down 1.4 

percent, followed by a 1% fall in wholesaling, with both those 

industries hurt because of the strike by General Motors in the U.S., 

Statistics Canada said. 

     While the one-time drag on auto production suggests GDP will 

rebound, the negative start to the fourth quarter means growth will lag 

even the Bank of Canada's modest estimate for annualized expansion of 

1.3%. Some economists have said another quarter where trade weakens 

growth following the third quarter's 1.3% pace means Governor Stephen 

Poloz may revisit his argument he can resist holding the G7's highest 

policy rate amid global trade tensions. 

     Another knock on Canada's economy now is the domestic spending 

Poloz has said has shown resilience. Retailing declined the most since 

March 2016 in October with a 1.1% contraction. The broad-based decline 

was led by automobiles and home improvement stores. 

     The GDP report closes out 2019 on a weak note the BOC must weigh 

along with other conflicting signals on jobs and inflation. Canada 

posted the biggest jump in unemployment since the last recession in 2009 

in the latest report, with the jobless rate still holding close to the 

lowest on record and wages running hot. The BOC has a single mandate of 

keeping inflation at 2% and the headline rate is now 2.2% with core 

prices running at the fastest pace in a decade. 

     The BOC has said that even with a slowdown in the fourth quarter, 

the economy remains close to full output and inflation is on track to 

hold near its target over the next two years. 

     Another item even in the GDP report suggesting resilience is that 

13 of 20 industries expanded in October. The economy also grew 1.2% in 

October from a year earlier.

--MNI Ottawa Bureau; +1-613-314-9647; greg.quinn@marketnews.com

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