Canada's economy expanded slightly in November, matching expectations, and likely stalled in December, data showed on Tuesday, broadly in line with the Bank of Canada's expectations for the economy to flatline during the first half of this year.
November gross domestic product (GDP) rose 0.1% in
November, Statistics Canada said, and was likely flat in
December, according to a preliminary estimate.
"The flash estimate for December suggested that there
was little if any growth during the final month of the year.
That aligns with our view that the economy is likely stalling,"
said Royce Mendes, head of macro strategy at Desjardins.
In December, gains in the retail, utilities, and public
sectors were offset by decreases in sectors including wholesale,
finance and insurance, Statscan said.
Annualized gross domestic product likely gained 1.6% in the
fourth quarter, above the Bank of Canada's 1.3% forecast. If the
flash estimate proves correct, the economy expanded 3.8% in 2022
from the previous year, above the central bank's 3.6% forecast.
"Today's data show that the Canadian economy continues
to cool, but not as yet shift into reverse, in the face of
rising interest rates," Andrew Grantham, senior economist at
CIBC Capital Markets, said in a note.
The Canadian central bank has raised its key interest rate
at a record pace of 425 basis points in 10 months to cool the
economy and bring inflation down. After the latest rate hike
last week, the Bank of Canada said it would likely hold off on
further increases.
Last week, the central bank said the economy would stall and
could tip into a mild recession during the first half of this
year.
"The overriding message is that the economy is just managing
to keep its head above water, which squarely fits with the Bank
of Canada's view," said Doug Porter, chief economist at BMO
Capital Markets.
Canada's service-producing sector grew 0.2% in November,
buoyed by a third straight month of gains in transportation and
warehousing. The goods-producing sector contracted 0.1% in
November, dragged down by declines in the construction and
manufacturing industries.
The Canadian dollar was trading 0.2% lower at
1.3405 to the greenback, or 74.60 U.S. cents, after clawing back
some of its earlier decline.
(Reporting by Ismail Shakil and Steve Scherer in Ottawa;
Additional reporting by Dale Smith; Editing by Paul Simao and
Mark Porter)
