Canada’s economy bucks forecasts, posts surprise gain – The Globe and Mail

Canada’s economy rebounded to a gain in November, marking a surprise win for a domestic economy that’s been repeatedly hammered during the final quarter of 2019.

Real gross domestic product increased by 0.1 per cent in the month, nearly offsetting a 0.1-per-cent drop in October, Statistics Canada said Friday. Economists had expected a flat reading in November, given a spate of weak data of late, along with the impact from a brief Canadian National Railway Co. strike and temporary Keystone XL pipeline closure.

But 15 of 20 industrial sectors expanded during the month, more than masking the fallout from those temporary events. In particular, the utilities sector was a strong contributor, increasing 2.1 per cent “as a result of unseasonably cold weather in central Canada,” Statscan said.

Construction increased by 0.5 per cent, as did retail trade, helped by car dealerships. House resale activity at the offices of real-estate agents increased for the ninth consecutive month, another sign of a fulsome rebound in Canadian home-buying activity.

“Overall, the above-consensus reading was surprising given the temporary factors which were expected to restrain growth (pipeline outage, rail strike, weather) and should limit the downside risk to the Bank of Canada’s [fourth quarter] forecast,” said Royce Mendes, senior economist at Canadian Imperial Bank of Commerce, in a client note.

The Bank of Canada last week revised its estimate for the fourth quarter to 0.3 per cent annualized growth, down from 1.3 per cent. For the first quarter of 2020, it expects growth of 1.3 per cent, down from a prior 1.7 per cent. The bank expects the economy to accelerate as the year progresses.

That may occur during a time of lower rates, however. Governor Stephen Poloz and his colleagues removed the word “appropriate” to describe the bank’s current policy rate of 1.75 per cent, which observers viewed as firmly putting a rate hike on the table.

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