Charles St-Arnaud, Research Analyst at Nomura, comments on the recent Canadian macro data release, and further notes that the current contraction in production suggests the BoC might cut rates further in March.
Key Quotes
“Monthly GDP decreased 0.2% in November, stronger than expectations, and follows an increase of 0.3% m-o-m in October.”
“The goods-producing side of the economy fell by 0.8% on the month, with decreases in mining, oil and gas (-1.5% m-o-m) and manufacturing (-1.9% m-o-m), while utilities reversed previous weakness by increasing 2.4% m-o-m and agriculture rose 0.8% m-o-m.”
“The service sector was flat on the month, but 8 out of the 15 categories showed a decline on the month.”
“Overall, the report is negative. With a contraction in November, growth in Q4 is likely to be weaker than the 2.5% q-o-q ar. expected by the Bank of Canada (BoC) in the January Monetary Policy Report.”
“There is also a concern that some key sectors of the Canadian economy are stalling, with weakness in manufacturing, oil and gas, and finance and insurance.”
“Moreover, the lack of momentum in manufacturing and non-energy exports suggests downside risk to the growth outlook.”
“We continue to believe that the BoC will cut rates again in the coming months and the contraction in November increases the likelihood that the next move will be in March.”
Key Quotes
“Monthly GDP decreased 0.2% in November, stronger than expectations, and follows an increase of 0.3% m-o-m in October.”
“The goods-producing side of the economy fell by 0.8% on the month, with decreases in mining, oil and gas (-1.5% m-o-m) and manufacturing (-1.9% m-o-m), while utilities reversed previous weakness by increasing 2.4% m-o-m and agriculture rose 0.8% m-o-m.”
“The service sector was flat on the month, but 8 out of the 15 categories showed a decline on the month.”
“Overall, the report is negative. With a contraction in November, growth in Q4 is likely to be weaker than the 2.5% q-o-q ar. expected by the Bank of Canada (BoC) in the January Monetary Policy Report.”
“There is also a concern that some key sectors of the Canadian economy are stalling, with weakness in manufacturing, oil and gas, and finance and insurance.”
“Moreover, the lack of momentum in manufacturing and non-energy exports suggests downside risk to the growth outlook.”
“We continue to believe that the BoC will cut rates again in the coming months and the contraction in November increases the likelihood that the next move will be in March.”
