OTTAWA: Canada’s economic output unexpectedly contracted in January, as the impact of tougher real estate regulations and oil sands shutdowns further applied to the brakes to an already sluggish economy.
Statistics Canada reported that real gross domestic product declined by 0.1 per cent in January from December on a seasonally adjusted basis, the first negative reading in five months. That partially undoes the 0.2-per-cent rise in December, which Statscan revised upward from its originally reported 0.1 per cent.
While economist had anticipated a relatively weak GDP report in light of a string of tepid earlier indicators for the month, they had expected the economy to have kept its head slightly above water. Their average estimate called for growth of 0.1 per cent. Statscan said the downturn was led by a 7-per-cent drop in oil extraction, the result of unscheduled maintenance downtime taken by oil sands producers.
The underlying story is that growth remains on a sluggish underlying path of less than 2 per cent, as it has been since the fever broke around the middle of last year,” said Bank of Montreal chief economist Douglas Porter in a research report.
And it’s unclear whether the two sectors that weighed down GDP in January are poised for a quick turnaround. Some major oil sands producers have announced further production curtailments, as they grapple with heavy price discounts and transportation bottlenecks for Western Canadian oil sands crude. And while the January real estate activity suffered from a drop-off from a particularly brisk December, the new mortgage regulations are expected to continue to weigh on mortgage lending and home sales.
But on the upside, the manufacturing sector grew a strong 0.7 per cent gain in January, despite weak motor vehicle output. And wholesale and retail trade and construction all posted solid gains.
Overall, the country’s 20 major industry sectors were evenly split between gains and declines in the month. Goods-producing industries, collectively, declined 0.4 per cent, while services-producing industries were flat month over month.
