Canadian economy surprises in January with 0.3% gain

But the decline in mining, quarrying and oil and gas extraction continues

Canada’s economy expanded 0.3 per cent in January, fully offsetting the declines in November and December 2018, according to Statistics Canada.

The rise was widespread as 18 of 20 industrial sectors were up, said the federal agency on Friday.

On a three-month rolling average basis, real gross domestic product edged up 0.1 per cent, the same rate as the three-month rolling average in December 2018.

But StatsCan said the decline in mining, quarrying and oil and gas extraction continues.

“Mining, quarrying and oil and gas extraction was down for the fifth consecutive month in January, contracting 3.1 per cent as all subsectors declined. Oil and gas extraction fell 2.6 per cent as all types of extraction were down in January. Oil sands extraction (-4.1 per cent) was down for a third consecutive month, partly as a result of the Government of Alberta’s imposition of a temporary cut in oil production starting in January 2019. This also influenced the 1.2 per cent decline in oil and gas extraction (except oil sands), which was partly offset by the continued ramp up in production in Newfoundland and Labrador, following weather-induced shutdowns and maintenance in late 2018,” it said.

Doug Porter
Doug Porter

Douglas Porter, Chief Economist with BMO Financial Group, said the expected big hit from the mandated oil production cuts in Alberta at the start of the year turned into just a glancing blow.

“Oil and gas extraction fell a moderate 2.6 per cent in the month (which isn’t a particularly large move in this whippy series), compared with estimates of as much as a 10 per cent drop,” said Porter in a commentary note.

“There are no two ways about this one, as it was quite simply above everyone’s expectations. This nice gain augurs very well, given that Alberta’s oil production cuts were viewed as the biggest drag on the economy at the start of the year, and growth sailed right through that headwind. While we are still concerned about some of the other headwinds swirling around the outlook at the moment — cooling global growth, a tired consumer, a softening housing market — this result clearly displays some serious underlying resiliency in the economy. It should also quiet some of the biggest bears, at least temporarily quashing recession chatter.”

Brian DePratt
Brian DePratt

Brian DePratto, Senior Economist with TD Economics, said the StatsCan report was a great surprise.

“We were expecting a more muted report, but in the event we got a solid print, front to back. There was great breadth, and it was nice to see construction turn in a positive performance after more than half a year in decline. Perhaps most telling is that absent the curtailment-related drag from the oil and gas sector, January would have been the strongest monthly showing in nearly three years,” he said.

“We shouldn’t get carried away however. To the extent that retail sales gives us a picture of consumer health, it was not an encouraging one, flat for a second month, while real estate sales in February were weak. But, a positive report is a positive report, and even with conservative assumptions going forward, today’s data sends our first quarter tracking significantly higher, to 1.1 per cent quarter-over-quarter, at an annualized pace.”

Mario Toneguzzi is a Troy Media business reporter based in Calgary.

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