Figures released Monday morning by Statistics Canada revealed this country's economy unexpectedly shrank in October, following steep retreats in manufacturing and retail sales.
The result reflects an economy that has suddenly lost steam, and it is prompting some market watchers to wonder whether the Bank of Canada will be forced to revisit its relatively upbeat outlook.
The agency said Canada’s gross domestic product, which tracks broad activity in goods and services in the economy, declined 0.1% in October from the previous month to a seasonally adjusted $1.975 trillion Canadian. Market expectations were for a 0.1% advance.
October’s month-over-month decrease was the first in eight months. On a year-over-year basis, the Canadian economy grew 1.2%.
The October GDP report is the latest in a string of disappointing indicators for the Canadian economy, which outside of housing is demonstrating tepid strength. The Bank of Canada projected 1.3% annualized expansion in the fourth quarter, but weak results in trade, manufacturing, retail and wholesale transactions have most forecasters now penciling much softer growth in the final three months of 2019.
Less than two weeks ago, Bank of Canada Gov. Stephen Poloz signaled he was content with the central bank’s outlook and rate policy. The central bank’s main interest has remained unchanged at 1.75% for more than a year. This has positioned the Bank of Canada as one of the few central banks among major developed and emerging economies to refrain from rate cuts in the face of slowing global economic growth.
The central bank next issues a rate decision and updated economic outlook Jan. 22.
