OTTAWA (Reuters) -Canada’s economy was essentially unchanged for the third consecutive month in October, missing growth forecasts, but gross domestic product likely edged up in November, Statistics Canada data showed on Friday.
Analysts polled by Reuters had forecast a 0.2% month-over-month rise. September’s GDP was downwardly revised to zero growth from an initial report of 0.1% growth.
In a preliminary estimate for November, Statscan said GDP was likely up 0.1%, helped by increases in manufacturing, transportation and warehousing, and agriculture, forestry, fishing and hunting.
Economic growth is stuttering under the impact of the Bank of Canada’s (BoC) 10 rate hikes between March 2022 and July. GDP unexpectedly declined in the third quarter, and the central bank expects growth to remain weak for a few quarters.
Money markets still see a roughly 25% chance of a rate cut in January and a 50% chance of a move in March. A cut is fully discounted for April.
Contraction in wholesale trade and manufacturing sectors weighed on the economy in October. It was the fourth decrease in the manufacturing sector in the past five months and the second consecutive decline in wholesale trade.
A strike along the St. Lawrence Seaway also impacted GDP, with the transportation and warehousing sector posting a 0.2% decline.
The declines offset gains in sectors including retail trade, which recorded its largest growth rate since January. Mining, quarrying and oil and gas extraction also increased after two consecutive monthly declines.
Overall, Canada’s goods-producing sector was marginally down, while the services sector posted a 0.1% increase.
The Canadian dollar was trading nearly unchanged at 1.3282 to the greenback, or 75.29 U.S. cents, after earlier touching its strongest in nearly five months at 1.3267.
The BoC has left its key policy rate on hold at a 22-year high of 5% since July as it weighs whether rates are high enough to bring inflation back to a 2% target.
Data this week showed Canada’s annual inflation rate unexpectedly held steady at 3.1% in November. Inflation has cooled from a peak of 8.1% last year, but it has remained above the central bank’s target since early 2021.
While the bank has maintained it is too soon to forecast rate cuts, money markets expect interest rates to start coming down in April.
Governor Tiff Macklem, in an interview aired on BNN TV on Monday, said the bank could start cutting rates next year as long as core inflation comes down as predicted.
The bank expects inflation to cool to 2.5% by end-2024 and returning to the 2% target by end-2025.
The BoC will release fresh economic projections along with its next rate announcement on Jan. 24 – after the release of jobs and inflation data for December.
(Reporting by Ismail Shakil and Dale Smith in Ottawa; Additional reporting by Fergal Smith in Toronto; Editing by Denny Thomas)
