By Promit Mukherjee
OTTAWA (Reuters) -Canada’s gross domestic product contracted by 0.2% in February on a monthly basis for the first time since November as activities across mining, oil and gas and construction sectors shrunk, data showed on Wednesday.
U.S. President Donald Trump’s constant threat of tariffs forced many to bring forward purchases, but as inventories built up tariff fears sucked out demand and hampered investments, and this has started to show across economic indicators.
A part of the decline in February was also due to bad weather and snow storms across provinces in Canada.
Analysts polled by Reuters had expected the economy to stay flat in February, in line with Statistics Canada’s advance estimate last month. January GDP had registered a growth of 0.4%.
The economy is likely to expand by 0.1% in March and on a annualized basis the GDP is expected to grow by 1.5% in the first quarter, Statscan said.
GDP numbers for the quarter are reported on the basis of expenditure and income while on a monthly basis Statscan uses growth by industry, hence final numbers could be slightly different.
Canada’s economic growth had been anemic in the first half of last year but strengthened as the year was ending on the back of rapidly falling interest rates and consumer prices. This stoked demand and propelled businesses to invest and hire more.
But the Bank of Canada and economists are predicting a tough year ahead as the country now grapples with steel, aluminum and automotive tariffs and various other import duties from the U.S., Canada’s biggest trading partner.
Currency swap market bets show there is an almost 50-50 chance that the BoC will extend its pause in interest rate cutting in June after halting the easing cycle in April.
The Canadian dollar was trading slightly weaker on Wednesday after the data, with the loonie down 0.01% to 1.3835 to the U.S. dollar, or 72.28 U.S. cents. Yields on the two-year government bonds were down 1.5 basis points to 2.531%.
The biggest dent to GDP came from the goods-producing industries which together contracted by 0.6%, the statistics agency said.
Following two consecutive monthly increases, the mining, quarrying, and oil and gas extraction sector became the largest detractor from growth, down 2.5% in February, as most subsectors contracted, Statscan said.
Construction fell by 0.5%, its first decline in four months, led by residential building construction which fell by 0.9%.
Services-producing industries such as real estate rental and leasing, finance and insurance, and educational services also contracted by 0.1%.
(Reporting by Promit Mukherjee; editing by Dale Smith and Mark Heinrich)
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