OTTAWA – The Canadian economy flatlined in February as gains in retail sales were offset by a drop in manufacturing, mining and the energy sector — more evidence of a slump that’s been triggered by lower commodity prices.
Statistics Canada said Thursday that real gross domestic product was unchanged in February from January, but it also said the economy shrank more in January than originally reported.
The federal agency revised its reading for January to a loss of 0.2 per cent from its initial estimate of a drop of 0.1 per cent.
The result for December, meanwhile, was updated to a gain of 0.4 per cent compared with an earlier report of a gain of 0.3 per cent.
The Bank of Canada has already said it expects no economic growth in the first quarter of 2015, but things will improve as the year progresses.
“Today’s GDP report confirms that Canada started 2015 on a sour note, although perhaps not as sour a note as some feared,” TD Bank economist Brian DePratto wrote in a note.
“The composition of growth suggests that the result of oil price shocks have not yet become widespread, as the non-commodity, non-manufacturing side of the Canadian economy managed to eke out growth in February.”
Service industries were up 0.1 per cent in February after dropping 0.2 per cent in January, helped by gains in retail sales, finance and insurance as well as the public sector.
The retail sector was up 1.5 per cent for the month of February helped by notable increases at general merchandise stores, food and beverage stores, sporting goods and hobby, book and music stores as well as at motor vehicles and parts dealers.
Royal Bank assistant chief economist Paul Ferley noted the weakness so far this year has reflected the impact of lower oil prices, as well as declines in mining and construction, but those aren’t the only factors.
“The weakness also reflects the transitory impact of the extreme winter weather that likely delayed purchases by both households and businesses,” Ferley wrote in a research note.
“As these weather-related factors reverse, growth is expected to bounce back in the second quarter. As well, though the cutbacks in the energy sector are expected to persist, it is anticipated to be increasingly offset by the supportive factors resulting from lower energy prices.”
Goods-producing industries fell 0.2 per cent after losing 0.1 per cent in January due to a decline in manufacturing and mining, quarrying and oil and gas extraction.
Durable-goods manufacturing dropped 2.5 per cent in February, while non-durable goods manufacturing rose 1.4 per cent.
Mining, quarrying, and oil and gas extraction fell 0.6 per cent.
Cold weather helped utilities grow by 2.3 per cent for February after increasing 1.7 per cent in January.