Canada

Friday, May 31, 2019 - 08:30

Canada 1Q GDP 0.4%, Below Analysts Expectations of 0.7%


By Greg Quinn

OTTAWA (MNI) - Canada's economic growth lagged expectations in the first quarter as weak foreign trade countered gains in consumer spending and business investment.

Gross domestic product grew at a 0.4% annualized pace, while analysts in a MNI survey had expected a 0.7% increase. Statistics Canada also lowered the fourth-quarter 2018 growth estimate to 0.3% from 0.4%.

The report confirms the ``detour'' Bank of Canada officials said the economy took late last year, and the two quarters combined are the slowest growth since an oil crash in early 2015. Policy makers held their key rate at 1.75% Wednesday and said there's evidence the economy will gather speed later this year. Statistics Canada's report Friday showed the first quarter ended on a positive note with a March gain of 0.5%, the fastest since last May and ahead of forecasts of 0.4%.

The first quarter figures showed a divide between healthy domestic demand that boosted consumer spending by 3.5%, the fastest in almost two years. Business investment rebounded with a 3.6% rise, following three previous consecutive declines. Canadian spending on imports also rose 7.7%, a drag on growth.

Exports were the other main source of weakness in the first quarter, with a 4.1% drop that was the fastest since the third quarter of 2017. Crude oil and farm products led the decline, in part because of transportation bottlenecks.

Another area the Bank of Canada is watching is business inventories, because they could be sign of products that are hard to sell. Inventories climbed C$17.7 billion in the first quarter, the most since the third quarter of 2017.

The March GDP gain included 16 of 20 industries tracked by Statistics Canada, including a 2.0% rise in oil and gas extraction that followed six previous consecutive declines. Energy production increased as the province of Alberta scaled back production cuts it mandated after prices tumbled.

--MNI Ottawa Bureau; email: greg.quinn@marketnews.com

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