- The Canadian economy grew 0.1% month-on-month in January. Hit by a string of negative factors such as factory closures and strikes, just 12 of 20 major sectors reported increased output.
- The good-producing sectors rose 0.2% as a whole, carried by a 0.8% gain in manufacturing. This was notable as January saw both the permanent shutdown of a major auto plant, as well as temporary shutdowns at other auto manufacturing facilities. Strong gains among manufacturers of non-durable goods, as well as machinery helped offset the drag from the transportation equipment sector.
- It was a similar story on the services side, up 0.1% despite a string of headwinds. First among these was a 1.7% drop in transportation and warehousing, owing to weaker air travel (inclement weather, COVID-19 related travel advisories), lower pipeline shipments (warm weather reducing demand for natural gas), and lower rail shipments (inclement weather). Educational services output also fell, down 0.7% on the back of labour disruptions in Ontario. Gains elsewhere, notably in finance and insurance (+0.9% on volatility-induced trading, per Statistics Canada) and wholesale trade (+1.2%) helped support overall growth.
Key Implications
- A mixed bag. The Canadian economy turned out a slightly better than expected performance in January, when COVID-19 was just beginning to make itself felt, but it was a very uneven one. With just 12 of 20 major industries growing, Canada appeared to be heading for another quarter of lacklustre growth before the coronavirus came fully onto the domestic economic landscape.
- As discussed in our latest forecast update, COVID-19 has now delivered a sudden stop to this already soft economic backdrop. For now, the focus of policymakers is rightly on getting us through this shock. Once we’re safely on the other side, we can re-focus the discussion on the underlying factors that were holding back economic growth before the shock hit.
