Canada economic growth slows

Canadian economic growth slowed to 0.3 percent in the last quarter of 2019, the government reported Friday, but still beat forecasts slightly. Gross domestic product (GDP) had been widely expected to fall to 0.2 percent from the previous quarter.

Added to previous data, the annual growth rate last year fell to 1.6 percent from 2.0 percent in 2018, said Statistics Canada. The government statistical agency blamed several factors for the results, including pipeline shutdowns, poor harvest conditions, and rail transportation strikes in the last three months of 2019.

Impacts from a US auto workers strike were also felt by Canada's motor vehicle and parts manufacturers, which rely on a highly integrated continental supply chain. And many businesses have been touched by "continued global trade tensions and market uncertainty," said Statistics Canada.

A strong rise in Canadian spending on services, including on rent, food and drinks, airfare and telecommunications services, helped to stave off a potential shrinking of the economy, the agency said.

But outlays on durable goods were flat. At the same time, the housing market softened, business investment fell (notably in aircrafts, trucks and buses), and export volumes fell for a second consecutive quarter while imports were down for a third quarter in a row.

Export volumes, according to Statistics Canada, weakened substantially in farm and fishing products crude oil and bitumen, and passenger cars and light trucks. Declines in imports including aircraft, passenger cars and light trucks and industrial machinery, meanwhile, outpaced increases in areas such as travel services and commercial services.

"The surprise was that there was no surprise in the Q4 GDP report," commented CIBC analyst Avery Shenfeld, adding that it was largely in line "with what the Bank of Canada was looking for." He warned, however: "Households aren't in a great position to carry the economy on their own, given a still low 3.0 percent savings rate."

A bump in December helped by better-than-expected factory and resource sector output would normally be seen as "a good handoff for Q1," Shenfeld said. "But that goes out the window given the new issues with global growth and yet more rail disruptions in February."

As such, he said Canadians should expect the central bank to cut its key lending rate in April - or sooner if markets continue to dive on fears of a novel coronavirus pandemic.