OTTAWA – The Canadian economy dipped in February, marking its first contraction since September, after the blistering pace it set to kick off the year.
Statistics Canada said Friday that real gross domestic product edged down 0.1 per cent in February compared with growth of 0.6 per cent in January.
The decline followed four consecutive months of growth and matched the expectations of economists, according to Thomson Reuters.
“While a decline in monthly GDP is never great news, this one was largely expected and doesn’t fully detract from the pleasant surprise in growth around the turn of the year,” Bank of Montreal chief economist Doug Porter said.
“With the strong start to the year, with oil prices well off the lows, and with fiscal stimulus hurtling down the pike, we are looking at GDP growth of 1.8 per cent for all of 2016.”
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The Bank of Canada recently raised its forecast for growth this year to 1.7 per cent due to the planned spending boost by the federal government announced in the budget.
The spending by Ottawa is expected to offset some of the damage done by the drop in oil prices.
However, CIBC chief economist Avery Shenfeld noted that the weak result in February could be a sign of things to come.
“We have reasons to expect that February will be followed up by disappointing results in the next few months, notwithstanding the large gain in household survey employment reported for March,” Shenfeld said.
“U.S. imports fell in March, including declines in categories where Canada is a major supplier. Canadian retail sales have run ahead of income growth, and may have been artificially lifted by much milder weather than the seasonal norm for the winter quarter.”
Statistics Canada said the output of goods-producing industries fell in February, while the service sector was essentially unchanged.
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Goods-producing industries contracted 0.6 per cent in the month, due to lower results in manufacturing and mining, quarrying, and oil and gas extraction.
Manufacturing output fell 0.8 per cent after rising for three months as durable goods fell 1.8 per cent and non-durable goods rose 0.4 per cent.
The service side of the economy saw a drop in wholesale sales offset by gains in retail sales as well as the public sector and accommodation and food services.
Wholesale trade contracted 1.8 per cent due to weakness in wholesalers of machinery, equipment and supplies, followed by the motor vehicles and parts and building material and supplies subsectors. Retail trade grew by 1.4 per cent.