24 Dec 2015
CAD: Canadian growth continues to falter - Nomura
FXStreet (Delhi) - Charles St-Arnaud, Research Analyst at Nomura, notes that the Canadian monthly GDP was flat month-on-month in October, below expectations, following a decline of 0.5% m-o-m in September as services are stagnating, while the goods sector continues to contract.
Key Quotes
“The goods-producing side of the economy was flat on the month. Growth in the sector came mainly from an increase in the mining, oil and gas sector (+0.7% m-o-m) and agriculture (+0.8% m-o-m), while there were losses in utilities (-1.4 % m-o-m) likely due to the warm weather, manufacturing (-0.3% m-o-m) and construction (-0.1% m-o-m).”
“The services sector was also flat month-on-month, mainly owing to a decline in activity in retail trade (-0.4% m-o-m), transportation and warehousing (-0.4% m-o-m), finance and insurance (-0.1% m-o-m) and wholesale trade (-0.1% m-o-m). These declines were offset by gains in real estate (+0.3% m-o-m), education (+0.3% m-o-m) and management of companies and enterprises (+0.5% m-o-m).”
“Overall, this is another negative report showing that growth continues to falter. The fact that activity in the service sector has been virtually flat for the past four months is particularly concerning, especially if the recent decline in oil prices leads to renewed contraction in the resource sector and in manufacturing.”
“Moreover, these number suggests that growth in Q4 is likely to be close to 0% and could even be negative. This is well below the BoC’s forecast of 1.5% in the October MPR. While we believe that the forthcoming fiscal stimulus reduces the need for further monetary policy stimulus, the weakness in the Canadian data increases the probability that the BoC will need to cut rates next year.”
Key Quotes
“The goods-producing side of the economy was flat on the month. Growth in the sector came mainly from an increase in the mining, oil and gas sector (+0.7% m-o-m) and agriculture (+0.8% m-o-m), while there were losses in utilities (-1.4 % m-o-m) likely due to the warm weather, manufacturing (-0.3% m-o-m) and construction (-0.1% m-o-m).”
“The services sector was also flat month-on-month, mainly owing to a decline in activity in retail trade (-0.4% m-o-m), transportation and warehousing (-0.4% m-o-m), finance and insurance (-0.1% m-o-m) and wholesale trade (-0.1% m-o-m). These declines were offset by gains in real estate (+0.3% m-o-m), education (+0.3% m-o-m) and management of companies and enterprises (+0.5% m-o-m).”
“Overall, this is another negative report showing that growth continues to falter. The fact that activity in the service sector has been virtually flat for the past four months is particularly concerning, especially if the recent decline in oil prices leads to renewed contraction in the resource sector and in manufacturing.”
“Moreover, these number suggests that growth in Q4 is likely to be close to 0% and could even be negative. This is well below the BoC’s forecast of 1.5% in the October MPR. While we believe that the forthcoming fiscal stimulus reduces the need for further monetary policy stimulus, the weakness in the Canadian data increases the probability that the BoC will need to cut rates next year.”