‘Modest’ growth in February: estimates

OTTAWA – The key word for February’s economic growth is “modest”: a month of small declines and narrow advances, adding up to a slight gain when Statistics Canada reports the country’s gross domestic product for the month on Monday.

The consensus expectation is for 0.2-per-cent growth in GDP in February, just above the 0.1 per cent reported in January.

“Broadly speaking, February was a soft month in terms of economic activity,” says Mazen Issa, Canada macro strategist for TD Economics.

“The slight increase i n hours worked, and solid 2.2per-cent month-over-month gain in wholesale volumes is expected to provide a modest offset to the weakness observed in manufacturing (-0.1 per cent) and retail (-0.6 per cent) volumes.

“Moreover, a decrease in crude-petroleum production owing to unplanned maintenance shutdowns in the month is expected to weigh on GDP output. Helping to offset some of this drag, however, will be real estate, which saw firm housing resale activity in the month.”

In fact, real estate data

“Broadly speaking, February was a soft month in terms of economic activity.”

ECONOMIST MAZEN ISSA

could result in GDP growth above the bank’s own expectation for a 0.1-per-cent gain in February. Issa says the first-quarter “is still shaping up broadly as we expected,” on track for a 2.1-per-cent quarterly annualized growth rate.

February’s economic data paint a picture of “lopsided growth” driven by wholesale sales, says Emanuella Enenajor, an economist with CIBC World Markets, which also is forecasting GDP to come in at 0.1 per cent, slightly below consensus.

“With wholesale auto sales leading the increase, it’s clear that vehicle demand – a key component of economic momentum in recent months – is still alive and kicking. But aside from that sector, don’t expect much good news elsewhere, particularly with Canada’s payrolls survey pointing to a 0.13-per-cent decline in overall employment that month.”

Still, at 0.1 per cent, the February gain would be stronger than the bank originally forecast, and it has revised its estimate for quarterly growth upward to 2.1 per cent to reflect the difference, matching TD Economics’ call, but below the Bank of Canada’s forecast for 2.5-per-cent growth for the quarter.