Yahoo Finance Canada's economy shows no growth in October, with GDP below analyst expectations
Canada’s economy showed no growth in October, Statistics Canada said on Friday, as GDP remained unchanged on a monthly basis at 0.0 per cent.
Analysts had been expecting GDP to grow 0.2 per cent on a month-over-month basis. October marks the third straight month where economic growth was essentially unchanged.
Statistics Canada says advance estimates for November showed that GDP increased 0.1 per cent last month, as increases in manufacturing, transportation and warehousing, agriculture, forestry, fishing and hunting were partially offset by decreases in retail trade.
"Canada’s economic engine continued to sputter in the fourth quarter," Royce Mendes, Desjardins' managing director and head of macro strategy, wrote in a research note on Friday. He says he expects the economy to post "virtually no growth" in the fourth quarter and continue to stagnate.
"As more households and businesses feel the impacts of higher interest rates in 2024, we expect Canada to fall into at least a mild recession. So while the economy is sputtering now, it might begin rolling backwards early in the new year."
Canada's economy has stalled in the wake of the Bank of Canada's aggressive tightening campaign that has brought its benchmark rate to 5 per cent. GDP unexpectedly contracted in the third quarter, and it is expected to be weak going forward. Assuming a flat December, fourth-quarter GDP is on track for a slight rebound of 0.4 per cent growth.
"Softness in demand will likely persist as more homeowners refinance at higher interest rates, keeping a lid on overall economic activity and seeing inflation decelerate further in 2024, opening the door for a rate cut in Q2 next year," CIBC economist Andrew Grantham wrote in a note on Friday.
Bank of Canada Governor Tiff Macklem said in an end-of-year speech last week that the central bank needs to see evidence that "inflation is on a sustained downward track" before it can begin discussing cutting its benchmark rate. He says the central bank's Governing Council has not yet discussed rate cuts.
Statistics Canada says the manufacturing sector contracted 0.6 per cent in October, marking the fourth time in five months that it has posted a decline. Wholesale trade was also down 0.7 per cent, with machinery, equipment and supplies wholesaling contributing most to the drop. The transportation and warehousing sector also declined 0.2 per cent in October, due to the impact of the strike at the St. Lawrence Seaway.
Retail trade was up 1.2 per cent, the largest growth rate since January, with sales at clothing and clothing accessory stores contributing most to the increase. Mining, quarrying and oil and gas extraction also rose.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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