- Q4/2019 GDP growth slowed to 0.3%
- ‘Transitory’ factors explain some but not all of the slowing
- Early 2020 also likely to be soft, and BoC likely to cut rates
Headline GDP increased just 0.3% in Q4 2019. That was broadly in line with market expectations, and matched the Bank of Canada’s last forecast. Temporary disruptions to activity from labour disputes in the rail transportation and motor vehicle sectors, and the temporary shutdown of a major oil pipeline explain part of the slowing, but by our count GDP still increased by less than a percent excluding those industries impacted by identifiable ‘transitory’ factors. Consumer spending was surprisingly solid in Q4 given earlier lackluster retail sales data, but business investment was softer than assumed and net trade was a larger drag on growth than expected.
Bank of Canada policymakers already appeared to be concerned about slowing underlying growth trends at the end of last year. There were some signs of stabilization in today’s data – GDP increased a relatively solid 0.3% compared to a month earlier in December. But growing fears about the potential impact of the new coronavirus (COVID-19) outbreak abroad, and another bout of disruptions to rail transportation from anti-pipeline protests mean growth is likely to remain weak, at least for the first half of 2020. We continue to look for the Bank of Canada to cut rates at least once in the months ahead.
