MNI DATA IMPACT: Canada Q4 GDP +0.3%; Dec. +0.3% Beats Median>

By Greg Quinn and Anahita Alinejad

     OTTAWA (MNI) - Canada's GDP growth slowed as expected in the fourth 

quarter while the gain for December beat economist forecasts to signal 

momentum for early 2020 as the central bank mulls whether to cut 

interest rates. 

     Gross domestic product slowed to a 0.3% annualized pace in the 

fourth quarter, matching the MNI economist median and the Bank of 

Canada's forecast. Statistics Canada's report Friday from Ottawa also 

reduced the third-quarter estimate to 1.1% from 1.3%. 

     The quarter ended on a pickup in December with a 0.3% expansion 

that was the fastest since May, and greater than the 0.1% MNI economist 

median. Transportation and warehousing rose 1.5% on rebounds in service 

following a CN Rail strike and a repairs to the Keystone oil pipeline. 

Manufacturing rose for the first time in four months with a 0.4% gain 

while mining and oil and gas gained 1.3%. 

     The Bank of Canada opened the door to cutting the G7's highest 

interest rate of 1.75% in January on signs that resilient domestic 

spending was fading and adding to pressure on exports and investment 

from global tensions. Governor Stephen Poloz said the key is whether any 

slowdown is persistent enough to justify the potential future cost of 

adding to record consumer debt burdens. 

     Statistics Canada's report suggests December may have been a 

turning point for the domestic economy -- which economists already saw 

rebounding in the first quarter. Other pressures could still harm growth 

early this year including China's coronavirus outbreak and protests 

blocking railway shipments between Montreal and Toronto most of this 

month. The BOC's next rate decision is March 4 and investors have raised 

bets on a cut in the next few months mostly on the coronavirus risk. 

     "The slowing of Canada's fourth-quarter GDP was influenced by 

several factors, including pipeline shutdowns, unfavourable harvest 

conditions, rail transportation strikes, impacts on motor vehicle and 

parts manufacturing from the United Auto Workers' strike in the United 

States, and continued global trade tensions and market uncertainty," 

Statistics Canada's report said.

     Fourth-quarter exports declined at a 5.1% annualized pace following 

the third quarter's 0.6% fall, led by food, crude oil and autos. It was 

the biggest decline in more than two years. Investment in 

non-residential structures, machinery and equipment fell 6.3%. 

     One sign of weakness was the CAD10.5 billion increase in business 

inventories, which StatsCan said was partly driven by supply chain 

disruptions.   

     Growth was supported by a 2% rise in household spending, matching 

the third-quarter pace. Spending rose on housing, food and 

telecommunications services. Imports declined for a third straight 

quarter with a 2.5% fall.

     GDP growth for all of last year slowed to 1.6% from 2% in 2018, on 

weaker trade and investment, Statistics Canada said.

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

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