- Canadian GDP rose 0.1% in November (consensus was flat)
- Transportation sector acted as a temporary drag
- Still tracking limited growth in Q4/19
A modest upside surprise in November GDP does little to change the narrative that Canada’s economy stagnated in Q4/19—the BoC’s 0.3% growth forecast still looks reasonable. Transitory factors were at play again in November, most significantly in the transportation sector which suffered from labour disruptions and pipeline outages. That drag should be reversed in December, though the transportation industry is now facing further challenges with some airlines canceling flights to China amid the coronavirus outbreak. Transportation disruptions also weighed on some manufacturing industries in November, which offset a rebound in motor vehicle production following temporary shutdowns in October.
While it’s difficult to untangle the myriad transitory factors that impacted growth in the second half of last year (the attached graph is our attempt) we think it’s fair to say that Canada’s economy geared down over that period, and particularly in Q4/19. As BoC Governor Poloz said last week, that has opened the door to a rate cut. The bank’s next meeting in March is a live one, though today’s data doesn’t exactly call for urgent action and our forecast remains for an April rate cut. What could tip the balance, though, is the evolving economic impact of the coronavirus (both here and abroad), and how much of a rebound we see in December’s activity indicators.
