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Canada’s economy stalled again in October but likely up 0.1% in November

Canada’s economy was essentially unchanged for the third consecutive month in October, missing growth forecasts, but gross domestic product likely edged up in November, Statistics Canada data showed on Friday.

Analysts polled by Reuters had forecast a 0.2 per cent month-over-month rise. September’s GDP was downwardly revised to zero growth from an initial report of 0.1 per cent growth.

In a preliminary estimate for November, StatsCan said GDP was likely up 0.1 per cent, helped by increases in manufacturing, transportation and warehousing, and agriculture, forestry, fishing and hunting.

Economic growth is stuttering under the impact of the Bank of Canada’s 10 rate hikes between March 2022 and July. GDP unexpectedly declined in the third quarter, and the central bank expects growth to remain weak for a few quarters.

Money markets still see a roughly 25 per cent chance of a rate cut in January and a 50 per cent chance of a move in March. A cut is fully discounted for April.

Slowdown in trade, manufacturing

Contraction in wholesale trade and manufacturing sectors weighed on the economy in October. It was the fourth decrease in the manufacturing sector in the past five months and the second consecutive decline in wholesale trade.

A strike along the St. Lawrence Seaway also impacted GDP, with the transportation and warehousing sector posting a 0.2 per cent decline. The declines offset gains in sectors including retail trade, which recorded its largest growth rate since January. Mining, quarrying and oil and gas extraction also increased after two consecutive monthly declines.

Overall, Canada’s goods-producing sector was marginally down, while the services sector posted a 0.1 per cent increase.

The Bank of Canada has left its key policy rate on hold at a 22-year high of five per cent since July as it weighs whether rates are high enough to bring inflation back to a two per cent target.

WATCH | Bank of Canada governor addresses inflation targets:

2% inflation target in sight but ‘not there yet,’ BoC governor says

In his final speech of the year, Bank of Canada governor Tiff Macklem touched on what still needs to happen before the central bank considers cutting rates. ‘We still need to see more downward momentum in core inflation,’ he said.

Data this week showed Canada’s annual inflation rate unexpectedly held steady at 3.1 per cent in November. Inflation has cooled from a peak of 8.1 per cent last year, but has remained above the central bank’s target since early 2021.

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