OTTAWA — The Canadian economy took a step back in January, but the 0.1 per cent decline in gross domestic product was a slightly better result than economists had expected.
Economists had estimated the Canadian economy would shrink by 0.2 per cent during the month after rising 0.3 per cent in December, according to Thomson Reuters.
Statistics Canada said Monday that January’s overall production of goods was up 0.3 per cent, helped by an increase in oil and gas extraction, utilities and the agriculture and forestry sector.
The gains were partly offset by a drop in manufacturing and, to a lesser extent, construction.
Meanwhile, the output of Canada’s service industries fell 0.3 per cent in January — the first drop since February 2014.
The federal agency attributed the decline in services to decreases in wholesale and retail trade and — to a lesser extent — in transportation and warehousing services, accommodation and food services.
The drop in gross domestic product in January came amid a steep drop in oil prices that prompted the Bank of Canada to cut its key interest rate as a form of insurance against the expected hit to the economy.
CIBC chief economist Avery Shenfeld noted the weakness in oil prices will show up in the sector’s capital spending rather than oil production, which is still likely to climb this year.
“Overall, while the first quarter will likely still be no better than one per cent growth, the issue for monetary policy will mostly be about how much of that weakness extends into the subsequent two quarters,” Shenfeld wrote in a note to clients.
In a Financial Times interview published Monday, Bank of Canada governor Stephen Poloz warned the oil-price shock will make the economy’s first-quarter numbers look “atrocious.”