Canada: Real GDP Growth Momentum Is Fading Fast

Real GDP advanced by 0.1% in February, coming in below consensus expectations (0.2%) and well below Statistics Canada’s flash estimate (0.3%). An expected drop in manufacturing activity (-0.1%) in February wasn’t enough to offset the gains in the goods-producing sector from utilities (0.6%), construction (0.3%) and mining and oil and gas extraction (0.1%). Looking to services-producing sectors, some of the sectors that saw outsized rebounds in January from weather-induced weakness in December experienced some of the largest setbacks in February. Statistics Canada’s flash estimate for real GDP is for a contraction of 0.1% in March. The February real GDP data contained a lot of information that should be considered supportive to the Bank of Canada’s prolonged pause on interest rates. A combination of slowing growth, decelerating inflation and financial instability should help to keep the Bank on the sidelines until the turn of the year.