Canadian economic growth shrinks in November, further weakness in oil sector to weigh on overall growth

Canada’s economic activity shrank in November. On a sequential basis, the Canadian economy contracted 0.1 percent. Overall, 13 industries out of 20 grew on the month, but this growth was overwhelmed by falls in wholesale trade, manufacturing and construction. As a whole, services industries came in flat on the month, as rises in administrations, arts and entertainment, and accommodation and food services were countered by falls in wholesale trade, finance and insurance, transportation and retail trade.

Softer bond and equity market activity contributed to the fall in financial services sector. In the meantime, a fall of 4.5 percent in output of postal and courier services related to the Canada Post strike resulted in the second straight month fall in transportation services. Softness in the retail trade sector was because of lower motor vehicle sales and building materials suppliers.

Goods producing industries dropped into contraction in November after growing 0.3 percent in the prior month. Manufacturing activity led the fall with a drop of 0.5 percent, as petroleum and coal products manufacturing added the most to the fall. This was because of a combination of refinery woes, mining, oil and gas extraction shrank 0.1 percent in the month.

Mining excluding oil and gas extraction grew 2.3 percent, partly countering October’s fall. Nevertheless, oil and gas extraction fell 1.6 percent, reflecting a fall in both commodities.

“Looking ahead, we anticipate further weakness in the oil sector to continue to weigh on overall growth as mandatory production cuts take effect in January. Indeed, declines in the oil patch are expected to subtract a full percentage point drag on 19Q1 growth. With today's data, we are now tracking Q4 growth at just 1.0 percent (q/q saar), below the Bank of Canada's October forecast of 1.3 percent”, said TD Economics.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at 23.3158, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -11.4165 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex