Canada’s gross domestic product contracted in January, raising expectations for a disappointing first quarter and reducing the likelihood that the country’s output gap would be closed by next year.
Real GDP declined 0.1 percent in January after rising 0.3 percent the previous month, Statistics Canada reported on Tuesday. A median estimate of economists called for a decline of 0.2 percent.
The service industries subtracted 0.3 percent from GDP in January, the first decline since February of last year. Goods production rose by 0.3 percent following a 0.4 percent gain in December, mostly as a result of higher oil and gas extraction. However, support activities for oil and gas extraction declined 2 percent, reflecting a sharp drop in crude oil prices.
Much of the decline was attributed to weaker wholesale and retail trade. Wholesale trade fell 2.6 percent in January, while retail trade declined 1 percent.
Tuesday’s figures are a sign of things to come in what is likely a disappointing quarter overall for the Canadian economy. Bank of Canada Governor Stephen Poloz expects an “atrocious” first quarter for the economy, leaving the door open to another rate cut should inflation continue to fall. Canada’s top central banker had previously hoped for first quarter GDP growth of around 1.5 percent. Now many observers expect the economy to contract modestly in the first quarter.
The Canadian dollar was on its heels in Tuesday’s North American session. The USDCAD was trading at 1.2728, advancing 0.4 percent. The pair had previously traded at 1.2786.