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Canada’s Economy Contracted 0.1% in November on Oil Shutdown

February 01, 2012

(Updates with economist comments starting in fourth paragraph, currency trading in eighth paragraph.)

Jan. 31 (Bloomberg) -- Canada’s gross domestic product posted an unanticipated decline in November, shrinking for the first time in six months on maintenance shutdowns by crude oil producers and lower natural gas extraction.

Output fell 0.1 percent to an annualized C$1.27 trillion ($1.27 trillion) after being little changed in October, Statistics Canada said today in Ottawa. Economists in a Bloomberg survey forecast the economy would grow 0.2 percent, based on the median of 23 responses.

The report suggests fourth-quarter growth will fall short of the 2 percent annualized pace the Bank of Canada estimated last month, with BMO Capital Markets today cutting its projection to 1.5 percent. Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have said growth will be modest this year as weak global demand curbs exports.

The report “shows how the economy is vulnerable to even minor hits,” said Doug Porter, deputy chief economist with Bank of Montreal’s capital markets unit in Toronto.

Output from oil and gas extraction and mining fell 2.2 percent in November to C$57.7 billion, which Statistics Canada said accounted for most of the decline in gross domestic product.

Wholesale trade fell 0.6 percent in November, offset by a similar increase in retailing. Construction fell 0.3 percent while manufacturing rose 0.6 percent, the third straight gain.

Home sales drove a 2.2 percent increase in the output of real estate agents and brokers, and reduced stock trading cut output in finance and insurance by 0.4 percent.

Dollar Trims Gains

Canada’s dollar trimmed gains following the report, after appreciating to the strongest level since October against its U.S. counterpart as optimism Greece is close to a debt-swap deal with creditors improved the outlook for riskier assets. The currency traded at 99.92 Canadian cents per U.S. dollar at 9:57 a.m. Toronto time, 0.2 percent stronger than yesterday. One Canadian dollar buys $1.008.

The world’s 10th-largest economy grew 2 percent in November from a year earlier, the slowest pace since February 2010, Statistics Canada said today. Growth will weaken to an average of 1.8 percent in the first three months of this year, according to a monthly Bloomberg economist forecast published yesterday.

Output would have to grow by 0.6 percent to 0.7 percent in December to generate a fourth-quarter growth rate of 2 percent, said Scotia Capital economist Karen Cordes Woods in a note to clients. The economy hasn’t grown that fast since December 2010.

Energy May Rebound

Porter also said that the economy is unlikely to shrink in the fourth quarter, in part because the energy industry may rebound in December.

In a separate report, the agency said the industrial product price index fell 0.7 percent in December from November, the most since June 2010, on a drop in petroleum and coal. Economists forecast a 0.1 percent decline in a survey with 11 responses.

The raw-materials price index fell 2.4 percent in December on a 3 percent drop in mineral fuels. A Bloomberg survey of nine economists had a median forecast for no change in the index.

Over 2011, industrial prices rose 2.8 percent while raw- materials costs rose 4.7 percent, suggesting factory profit margins have been shrinking.

--With assistance from Ilan Kolet in Ottawa. Editor: Paul Badertscher, Gail DeGeorge

To contact the reporter on this story: Greg Quinn in Ottawa at

To contact the editors responsible for this story: Christopher Wellisz at; David Scanlan at

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