OTTAWA, March 31 (Reuters) – Canada’s economy grew modestly in January, with monthly output rising slightly as strength in many manufacturing industries offset lingering manufacturing weakness, data showed on Tuesday.
GDP rose 0.1% in January on a monthly basis after a 0.2% gain in December, Statistics Canada said, pointing to a weak start to the year.
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The forecast, which is often subject to change, showed the economy could grow by 0.2% in February.
Analysts polled by Reuters had predicted an unbelievable January.
Although exemptions under the free trade agreement between the US, Mexico and Canada have protected some sectors, growth has slowed significantly, and Canada’s economy contracted in the fourth quarter. The upcoming review of the United States-Mexico-Canada Agreement is seen as a major uncertainty surrounding the economy.
Manufacturing industries, which make up a quarter of GDP, increased by 0.2% in January, matching the previous month’s gain.
Mining, drilling, construction and oil and gas extraction helped offset the 1.4% decline in manufacturing output in January, StatsCan said.
The construction sector expanded for the third month in a row in January. The drop in manufacturing, the second largest component of monthly GDP, wiped out all the growth seen in December.
Service industries such as real estate, finance and health care are the biggest contributors to Canada’s economy, but growth in this category stalled in January, the statistics office said.
Activity in large businesses, transportation and real estate fell in January, dampening growth in other key economic contributors such as retail, education and financial and insurance services.
Overall, nine out of 20 sectors reported growth in January, StatsCan said.
GROWTH, PRICE CONTROL
The Bank of Canada could also be forced to raise interest rates.
“Global energy price concerns from the US-Iran conflict are unlikely to derail the Canadian economy, but compound existing headwinds from US tariffs, trade policy uncertainty and a declining population,” Michael Davenport, senior economist at Oxford Economics, wrote in a note.
“Developments in the Middle East and the outcome of the USMCA’s mid-year review remain uncertain, but will be important to Canada’s economic outlook this year,” he said.
Financial markets do not expect a change in interest rates at the next meeting of the Bank of Canada in April, but prices increase by one point of 25 points in the second half of the year.
The Canadian dollar was down 0.07% at C$1.3932 to the US dollar, or 71.78 US cents. Canadian two-year government bond yields fell 4.7 basis points to 2.668%.
Reporting on Promit Mukherjee; Edited by David Goodman and Paul Simao
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