Canada’s gross domestic product unexpectedly stalled in October, another sign the economy is struggling to recover from an oil-price shock.
Output was little changed at an annualized C$1.64 trillion ($1.18 trillion) compared with September, when the economy contracted 0.5 percent, the most since March 2009, Statistics Canada said Wednesday from Ottawa. Economists surveyed by Bloomberg predicted a 0.2 percent October expansion.
Non-conventional oil extraction rose 4.5 percent in October following a 10.6 percent drop in September when fires and maintenance shutdowns interrupted production. Public sector output rose 0.2 percent on the month.
The list of shrinking industries was much longer. Manufacturing fell by 0.3 percent led by food and plastics. The output of utilities declined by 1.4 percent. Retail fell by 0.4 percent and the 0.1 percent decline in wholesaling was the fourth straight.
Today’s report also showed a 0.4 percent decline in transportation and warehousing and a 0.1 percent fall in construction.
Investors are increasing bets Bank of Canada Governor Stephen Poloz will cut his 0.5 percent interest rate as oil prices hit new lows and growth in many other industries remains fails to take up the slack.
“There are a lot of headwinds to the Canadian economy right now,” Bruce Cooper, chief investment officer of the asset management arm of Toronto-Dominion Bank, said in a Dec. 18 interview with Pamela Ritchie on Bloomberg TV Canada. “There’s no silver bullet they can fire that will re-ignite the Canadian economy” at the Bank of Canada, he said.
Economists surveyed by Bloomberg already predict fourth-quarter growth will lag the central bank’s forecast for an annualized gain of 1.5 percent. The survey’s median estimate is for a 1.1 percent increase.
Falling commodity prices have led to production or job cuts at companies from Potash Corp. of Saskatchewan, Devon Energy Corp. and Meg Energy Corp.
At the same time, manufacturers are struggling to reap the full benefit of the Canadian dollar’s 17 percent decline this year and increasing demand from the U.S.
Economists surveyed by Bloomberg predict growth slowed to 1.2 percent this year from 2.5 percent in 2014. Canadians will have to wait for at least two years before growth returns to where it was before the drop in oil prices — consensus is for 1.8 percent in 2016 and 2.1 percent in 2017.
Sluggish economic growth was a key topic of a meeting of Canada’s provincial and federal finance ministers this week, and included a private briefing from Governor Poloz.
“While we have some reason for optimism, it’s cautious optimism,” Bill Morneau, the federal minister, told reporters Dec. 21 when asked about Poloz’s briefing.