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The Canadian economy registered a third consecutive month of effectively no growth on a month-on-month (m/m) basis in October. This print comes in below Statistics Canada’s advanced guidance and market expectations for a 0.2% m/m gain. The flash estimate for November points to a modest gain of 0.1% m/m.

October’s reading was mixed, with output expanding in 10 of 20 industries. Goods producing industries showed no growth, while the services side showed a positive 0.1% m/m gain.

On the goods side, durable goods manufacturing (-1.3% m/m) dragged the overall sector down for the fourth time in five months. The construction sector registered a slight 0.1% m/m contraction. Offsetting these declines was a 1.0% m/m gain in the mining, quarrying, and oil & gas sector.

On the services side, retail trade grew by a healthy 1.2% m/m, led by clothing, general merchandise and personal care stores. Accommodation and food services advanced by 0.9% m/m while health care and education notched slight gains of 0.3% m/m and 0.2% m/m, respectively. Wholesale trade (-0.7% m/m) pulled back for a second straight month. The St. Lawrence Seaway strike impacted the transportation sector (-0.2% m/m).

The advanced reading of slight growth in November was driven by increases in manufacturing, transportation, and agriculture. November’s retail trade was cited as a headwind.

Key Implications

October’s GDP print ended up a little frosty against expectations that the economy would advance at a decent pace. With today’s print and guidance for November, fourth-quarter GDP is tracking sub-1.0% quarter-on-quarter annualized. This is roughly in line with our own expectations as well as that of the Bank of Canada (BoC).

It’s safe to say that rate hike risk is virtually off of the table with markets now squarely focused on the timing of rate cuts. The BoC has firmly entered into a holding pattern as they receive evidence that growth is evolving in a manner consistent with reaching their 2% inflation target. We expect the BoC to still remain vigilant and not declare victory too early. But all said, the Bank should feel a sense of comfort heading into the new year.

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