Canada: Slowdown likely to be transitory - RBC CM

Canadian GDP contracted 0.1% during November. Josh Nye, Senior Economist at  RBC Capital Markets, explains that the slowdown could prove to be transitory and notes that the Bank of Canada won’t be surprised by the report. 

Key Quotes: 

“Canadian GDP was on consensus, falling 0.1% in November. That is the second decline in three months, leaving year-over-year growth at 1.7%.”
 
“Today’s GDP release was pretty much as expected, coming in on consensus with a 0.1% decline. Even the details were fairly predictable—manufacturing, wholesale and retail trade slowed (as flagged in earlier reports) and transportation and warehousing activity was down for a second consecutive month as the Canada Post strike continued through nearly all of November. And oil and gas extraction fell due to weather-related disruptions on the East Coast (there were also reports that oil companies began curtailing production amid steep discounts on Western Canadian oil).”

“We think much of this slowing will prove transitory, but over varying timeframes. Weakness in the transport sector will have reversed in December as labour disruptions ended. A slowdown in the energy sector will last a bit longer.”

“Today’s release is in line with our call for Q4/18 GDP growth in the 1% (annualized) range, and Q1/19 isn’t likely to be much better. The Bank of Canada has anticipated this, expecting gains of 1.3% and 0.8% in Q4 and Q1—meaning today’s release won’t surprise Governing Council, either.”