Canada’s economy started off the year on positive, if tentative, footing in January, registering a modest 0.1 per cent gross domestic product gain after the strong handoff from the end of year.
The increase matched expectations, although markets were pleasantly surprised by an upward revision of a tenth of a point for the December reading to 0.5 per cent.
Analysts were initially mixed on the portents going forward, with some expecting better results in upcoming months.
“It was weaker, but if you take the last two months together and average them up, you get an economy growing by 0.3 per cent monthly and that’s actually a solid performance,” said TD Bank chief economist Craig Alexander.
Alexander said January’s GDP reading doesn’t change his view of the economy for the year. He recently upgraded his outlook for the year to 2.2 per cent growth, up half a point from his December estimate, mostly because of the good news coming out of Europe and the uptick in the United States.
Scotiabank’s Derek Holt, however, worried about the softer details in the report, with key sector such as mining and oil extraction, forestry and fishing, construction and public administration falling back.
The biggest contribution came from surprising strength in utilities and manufacturing, particularly auto production.
Some of the setback in key sectors may have been due to temporary factors. Statistics Canada cited the Rio Tinto aluminum smelter lockout in Alma, Que., as contributing to the decline in primary metal sales. The Caterpillar lock-out former Electro Motive employees at London, Ont., also likely played a role, said Erin Weir, an economist with the United Steelworkers union.
In the details of the Statistics Canada report, manufacturing rose 0.7 per cent in January, a fifth-straight monthly increase.
Production of durable goods rose 0.8 per cent with higher output of fabricated metal products, transportation equipment and wood products.
There were also increases in the finance and insurance sector, utilities, wholesale trade, some tourism-related industries and the public sector.
Decreases were recorded in forestry and logging, arts, entertainment and recreation as well as in construction.
Oil and gas extraction declined 0.9 per cent as a notable drop in natural gas extraction outweighed a gain in crude petroleum production.
Production of non-durable goods advanced 0.6 per cent on the strength of chemical and food production.
The finance and insurance sector rose 0.4 per cent, mainly as a result of an increase in management activity for mutual funds, residential mortgages and business loans.
Wholesale trade increased while retail trade was flat.