OPTIMISM DESPITE SLIP IN GDP
After a strong start to the year, Canada’s gross domestic product (GDP) faltered in February by slipping 0.1%. This decline reversed only part of the substantial 0.6% advance in January. According to BMO Chief Economist Douglas Porter, “the small setback still leaves GDP growth on track to come in at a better-than 3% annualized rate for all of Q1, even if March’s GDP is roughly flat.”
Looking at February’s GDP estimates on an industry level, it appears to be a tale of two sectors – relatively resilient services and soft goods producing sectors. The overall drop in GDP was largely the result of a 0.6% drop in the goods producing sector which was pulled down by 0.8% drops in both the resource sector and manufacturing. A big surge in retail trade (+1.4%) buffered a drop in wholesale trade (-1.8%) which is highly tied to the goods producing sector. Construction was a bright spot at +0.1%, probably helped by the mild winter. However, construction is still down 3.1% year-over-year, due to a big pullback in non-residential activity.
The Bottom Line: While a decline in monthly GDP is never good news, this one was largely anticipated and doesn’t fully detract from the growth in January. Optimism is still warranted given the strong start to the year, the moderation of oil prices off historic lows, and opportunities related to fiscal stimulus. Bay St. economists are looking at annual GDP growth for 2016 in the range of 1.8%. Up from last year’s lack-lustre 1.2% growth rate. Ontario is expected to out-perform national economic growth by almost a full percentage point.
FOR MORE INFORMATION, CONTACT:
Director of Research,
Ontario Construction Secretariat (OCS)
180 Attwell Drive, Suite 360, Toronto, ON M9W 6A9
P 416.620.5210 ext. 222