Stalled GDP could spur interest rate cut: analysts

Canada's economy was stable overall in October, as gains in the resource sector offset declines in production and consumer spending.

See Full Article

The country's gross domestic product was unchanged, after falling 0.5 per cent in September, according to Statistics Canada data released on Wednesday.

According to StatsCan, gains made in the resource industries and the public sector were offset by declines in manufacturing, utilities and retail trade. Its latest numbers showed the following:

  • Mining, quarrying and oil and gas extraction rose 0.7 per cent in October, following a 4.7 per cent decline in September.
  • The public sector (education, health and public administration) grew 0.2 per cent in October.
  • Manufacturing output fell 0.3 per cent in October, after declining 1.0 per cent in September.
  • Retail trade contracted 0.4 per cent in October, and wholesale trade edged down 0.1 per cent.
  • The finance and insurance sector decreased 0.1 per cent in October, the third consecutive month of declines.
  • Construction edged down 0.1 per cent in October.

Interest rate cut on the horizon?

News that the economy had failed to grow for the month of October prompted analysts to speculate if the Bank of Canada would again cut its key lending rate.

Capital Economics Senior Canada Economist David Madani said that the further decline in the export-orientated manufacturing sector will be "discouraging" to the Bank of Canada.

"It has pinned its hopes for growth on an export-led revival. But as we have warned before, this is simply wishful thinking," he wrote in a response to the StatsCan data.

"Overall, with the economy stagnating this quarter, the amount of excess slack will increase, creating more downside risk to the Bank of Canada's outlook for underlying inflation. This supports our long-held view that another interest rate cut is likely early next year, probably in April, though possibly sooner if oil prices fall any further."

Madani noted that despite showing a rebound in the summer, it appears that the economy "may never have escaped the recession” this year.

CIBC Capital Markets economist Nick Exarhos said the new figures could put Canada on track for zero growth in the fourth quarter. He also said that the lack of growth could mean the another interest rate cut the central bank is on the horizon.

In its monetary policy report released in October, the Bank of Canada had predicted growth of 1.5 per cent in the fourth quarter of 2015.

Oil prices to rebound…slowly

Meanwhile, OPEC predicted a slow rebound for oil prices in its annual World Oil Outlook.

The OPEC report, released Wednesday, said it expects oil prices to recover to US$70 a barrel in 2020, and US$95 a barrel by 2040. On Wednesday, the price of crude oil was US$37 a barrel.

With files from The Canadian Press



Advertisements

Latest Economic News

  • Site C dam project draws criticism at Vancouver public input session

    Economic CTV News
    VANCOUVER - Critics of an $8.8-billion dam project in British Columbia voiced concerns over the long-term costs of the project during the first in a series of public input session. The province's new NDP government directed the BC Utilities Commission to review the economic viability of the Site C hydroelectric dam project that was initiated by the former Liberal premier Christy Clark. Source
  • Pricey even with a contract: Wireless carriers release iPhone 8, iPhone X pricing

    Economic CBC News
    The first of the new iPhones are now available in Canada and wireless companies have released their pricing. With a two-year contract at Bell and Rogers, the iPhone 8 will cost $229 Cdn or $429 depending on the memory size. Source
  • Third round of NAFTA talks opens in Canada

    Economic CTV News
    OTTAWA -- A third round of NAFTA renegotiations has begun with chief negotiators from Canada, the U.S. and Mexico meeting in the Canadian capital. Canada's chief negotiator, Steve Verhuel, said Saturday that he doesn't expect this round to see any new U.S. Source
  • Chief Canadian NAFTA negotiator not expecting progress on auto content rules

    Economic CTV News
    OTTAWA - Despite tough talk from the U.S. about the job-killing impact of NAFTA on its automotive sector, Canada's chief negotiator isn't expecting to see a detailed proposal from the Americans during the latest round of talks to rewrite the continental trade pact. Source
  • 'Trump has scared the bejesus out of everyone': How Canada could win the Amazon sweepstakes

    Economic CBC News
    Handicapping the Amazon sweepstakes has become something of a cottage industry in the last few weeks. Predictions of which city will land the company's coveted second headquarters cite everything from the bright lights of big cities like New York and Boston to Denver's crisp Rocky Mountain air to Chicago's spot as a hurricane-free haven. Source
  • Pickleball, anyone? A planned retirement village for active boomers

    Economic CBC News
    Tony DiFruscio is a confessed Disney-holic. "I'm a huge Disney fan," says the president of Zest Communities, a Hamilton property developer. "We go there every year with the family, my oldest son went there for his honeymoon. Source
  • Calgary and Saint John mayors urge NEB to reverse Energy East pipeline ruling

    Economic CTV News
    CALGARY -- Mayors from both ends of the proposed Energy East pipeline are calling for the National Energy Board to reverse its requirement that upstream and downstream emissions be included in its review of the $15.7-billion conduit. Source
  • Lawsuit tossed against Little Caesars over non-halal pepperoni

    Economic CTV News
    DETROIT -- A judge has rejected a lawsuit against a pizza franchise, alleging it sold pork as "halal pepperoni" at one of its locations in a Detroit suburb. The Detroit Free Press reports that on Thursday the Wayne County judge dismissed the lawsuit filed by Dearborn resident Mohamad Bazzi against Little Caesars Pizza. Source
  • Walmart testing service that delivers right into customers' fridges

    Economic CTV News
    NEW YORK -- Would you be OK with letting a stranger into your house for the sake of convenience? Walmart is testing the idea with a new service that lets a delivery person walk into your home when you're not there to drop off packages or put groceries in the fridge. Source
  • Quebec renews Uber's permit for another year with tighter rules

    Economic CTV News
    Quebec's transportation minister is renewing a deal allowing ride-hailing company Uber to operate for another year in the province. Laurent Lessard says the deal extension tightens the rules under which the San Francisco-based company will be permitted to continue offering its services to Quebecers. Source