Canadian Real GDP (November 2019)

Cold Weather Keeps The Canadian Economy Warm In November 

• Economic activity expanded by 0.1% in November. There were some outsized movers in the month, but the breadth of growth was nevertheless solid as 15 of the 20 major sectors saw output rise. 
• Both the goods and services sides of the economy expanded (each up 0.1% month-on-month). Among the former, a 2.1% surge in utilities, driven by unseasonably cold weather, carried the day. This sector, together with construction (+0.5%) was roughly enough to counter a 1.4% drop in mining, quarrying and oil and gas as the metals sector was hit by a temporary potash mine closure.
• On the service side, strikes and pipeline disruptions drove a 0.9% drop in transportation sector activity, and both wholesale trade (-0.4%) and arts and entertainment (-0.7%) saw lower activity. These declines were offset by broad-based gains elsewhere (12 of 15 major service categories reported expanding activity).

Key Implications

• That's a sigh of relief. Between the list of one-off disruptions and a drop in payrolls-based measures of hours worked, we were primed for a weaker report today. What we received was definitely more encouraging. Cold weather may have carried the day, but the solid breadth of expansion on the service-side of the economy suggests that, at least as far as November was concerned, the one-off issues were just that. 
• Before we get carried away, a bit of perspective is needed – the risk going into this morning was that we'd be looking at a fourth quarter contraction in output. That thankfully seems off the table, but our revised growth tracking of 0.3% annualized, in line with the Bank of Canada's estimate, is still pretty much a standstill.
• The list of temporary factors weighing on the Canadian economy seems to grow longer every day, with the novel Coronavirus the latest addition. While its still a bit early to begin putting firm numbers on its economic impact (see our Chief Economist's recent thoughts), it is obviously another factor likely to drag on activity in early 2020. The tests of Canada's economic resilience continue.

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