- Economic growth in Canada slumps to a 0.3% annualized rate in the fourth quarter.
- Canada's economic slowdown in the recent quarter marked the worst in around four years.
- Statistics Canada downwardly revised Q3 economic growth to a 1.1% annualized rate.
- Market expectation for a rate cut by the BoC in the upcoming policy meeting is high.
Statistics Canada announced the quarterly GDP report on Friday. The data suggested Canada’s economic growth to have slumped to 0.3% annualized rate in Q4. The reading was marked the worst in around 4 years. According to Statistics Canada, unusually bad weather, disruptions in business operations driven from the recent outbreak of Coronavirus in China and its fast spread across borders, and strikes were among the top reasons that contributed to the slowdown in Canada’s economy in the fourth quarter.
Statistics Canada Downwardly Revised Q3 Economic Growth To A 1.1% Annualized Rate
The quarterly report, however, came in line with what the Bank of Canada had previously estimated as well as the analysts forecast that was reported earlier by Reuters. The data for economic growth in Canada in the third quarter was also revised on Friday to a 1.1% annualized rate from the previously reported 1.3%, as per Statistics Canada.
Statistics Canada attributed the slowdown to the railway strike that spanned over 8 days, poor harvest conditions, pipeline shutdowns, global trade tensions, and the Coronavirus emergency. Canada’s economy performed the worst in the recent quarter since 2016’s Q2 when it recorded a 2.0% decline following the fire incident in a region known primarily for oil production.
In Q4, households in Canada spent 0.8% more on services as compared to the figure for the third quarter. Business investment, on the other hand, on equipment and machinery saw a 3.6% decline that marked its third drop in a row. The decline in export volumes was reported at 1.3% in the recent quarter.
Market Expectation For A Rate Cut In BoC’s Upcoming Policy Meeting Is High
The Bank of Canada (BoC) is scheduled to announce its decision regarding monetary policy leniency on March 4th. Following Friday’s economic data that suggests major challenges to the economy in the upcoming months along with the health emergency in China that is weighing heavily on global business operations, the market expectations of a rate cut by the BoC in its upcoming policy meeting have skyrocketed. The last rate cut by the Bank of Canada was announced in October 2018.
The forex market responded fairly strongly to the economic data on Friday. USD/CAD was reported to have surged from a daily low of 1.3385 to a high of 1.3463 earlier today. Much of the gain, however, was lost later on Friday with the currency pair having dropped to 1.34 level again. At the time of writing, USD/CAD is exchanging hands at 1.3430 in the forex market.