Canadian GDP may show weakness
February data set to show economy faltered after strong January
It could be payback time for Canada’s economy.
Gross domestic product data, which previously revealed a surprisingly strong January liftoff for 2016, will likely now show the economy fell back in February.
Friday’s GDP report from Statistics Canada is expected to show a 0.2 per cent drop in output, after growth of 0.6 per cent in January — the outcome of weaker exports, factory and wholesale activity.
February’s anticipated drop “will reverse only part of January’s huge gain, and still suggests growth will come in around three per cent in Q1,” Benjamin Reitzes, senior economist at BMO Capital Markets, said in a note to inves- tors. “Declines in exports, manufacturing and wholesale trade are expected to weigh” on output, Reitzes said, although real estate and retail sales activity “should provide some positive offset.”
In the final quarter of 2015, the economy rose by 0.8 per cent and the Bank of Canada is forecasting a 2.8 per cent advance in the first three months of this year — slightly below private-sector predictions. “February’s performance is an emphatic exclamation point that the Q1 growth spike is not sustainable,” Reitzes said.
In a week dotted with fiscal and monetary events, the U.S. economy will draw attention as well, with analysts forecasting a slowdown in first-quarter growth to one per cent — down from a rate of 1.4 per cent in the fourth quarter of 2015.
The U.S. Federal Reserve began raising its key lending level at the end of 2015 — taking it to a range of 0.25 to 0.5 per cent — but policy-makers appear to have slowed their planned rate of increases this year from four to probably just two moves. The Fed is not expected to provide markets with any fodder coming out of its Wednesday meeting, given there will be no updated forecasts and no news conference by Fed chairwoman Janet Yellen.
“Nevertheless, we are looking for the statement ‘global economic and financial developments continue to pose risks’ to remain largely intact and a mark to market of the economic assessment, which includes continued strength in the labour market,” noted economists at RBC Capital Markets.
BMO economist Sal Guatieri said the Fed statement will be notable, “not because there is even a remote chance of a policy change, but for possible hints of a move at the next meeting.”