2 weeks ago
Economic Indicators

Canada's Economy Nearly Stalled in 4Q on Weak Investment, Oil

Investing.com - The Canadian economy came close to stalling at the end of last year, according to official data released

Investing.com - The Canadian economy came close to stalling at the end of last year, according to official data released on Friday.

Canada’s gross domestic product, or the broadest measure of goods and services produced in an economy, rose only 0.1% in the fourth quarter from the previous three months, Statistics Canada said, reflecting a weakening housing market, softer oil prices and the effect of both on consumer confidence.

The agency said investment fell 2.7% in the quarter, while housing investment in particular fell 3.9% and new construction fell 5.5%. Household spending also slowed for the second-straight quarter. Falling oil prices also meant that exports fell 0.1% in the quarter.

The result was marginally ahead of economists’ expectations for a flat reading, but the loonie still fell against the dollar on the news. By 09:15 AM ET (1415 GMT), the greenback stood at $1.3360, up a cent from before the data.

In year-on-year terms, fourth-quarter output was up 1.7% from a year earlier. That's unchanged from the third quarter and an improvement on forecasts for only 1.4% growth. Over the whole of 2018, Canada's economy grew only 1.8%, down from 3% in 2017. That's despite the marked pickup in growth in the U.S., its biggest trading partner.

The data challenge the Bank of Canada's intention to raise interest rates later this year, adding to the evidence of a broad weakening of activity in recent months. Annual inflation, at 1.4% in January, is still well below the bank's official target.

Still, it is uncertain when the bank will raise the benchmark rate, Bank of Canada Governor Stephen Poloz said last week.

The bank is due to announce its next interest rate decisions on March 6. Poloz had warned last week in particular about the housing market, business investment levels and global trade uncertainty.

"Given these uncertainties, we have kept interest rates unchanged at 1.75% since last October," Poloz said. "We will remain decidedly data-dependent as the domestic and international situations evolve."