Talking Points:
- Oct GDP at -0.3% m/m, +1.5% y/y, vs +0.0% m/m, +1.8% y/y expected
- USD/CAD rises after Canada’s October Gross Domestic Product trails expectations
- Check out the DailyFX economic data calendar for market moving releases in the upcoming days.
Canadian overall economic activity decelerated sharply in October following modest growth in September, highlighting the many challenges that the economy continues to face as a result of the slump in oil prices.
Statistics Canada reported that Gross Domestic Product contracted 0.3% in October and only grew 1.5% annually amid a widespread decline in factory output and lower oil and gas extraction. Analysts surveyed by Bloomberg News had anticipated flat growth for the month and a 1.8% year over year expansion. The breakdown showed that goods-producing industries only grew 0.5% y/y and was undermined by a 2.5% y/y drop in construction and a 0.2% y/y decrease in manufacturing activity.
The negative news today comes on the heels of a weak inflation report yesterday that showed November consumer prices declined at the fastest pace in 11 months (-0.4% m/m) underscoring the fact domestic demand remains weak as significant economic slack lingers. As far as the economic rebound, the GDP data for the month of October suggests that recovery may take longer than anticipated for which monetary policy may have to remain accommodative through 2017.
Here’s a summary of the Canadian data:
- CAD Gross Domestic Product (OCT): -0.3% versus +0.0% expected, from a revised +0.4% (m/m).
- CAD Gross Domestic Product (OCT): +1.5% versus +1.8% expected, from +1.9% (y/y).
Chart 1: USD/CAD 1-minute Chart Intraday (December 23, 2016)
Immediately after Statistics Canada published its GDP data for October, the U.S. Dollar extended its gains against the loonie, with the USD/CAD pair rising as high as C$1.3550. It is important to point out, however, that price action today comes in a context of reduced liquidity as many market participants have already closed their books ahead of the holidays. At the time this report was written the USD/CAD had settled around C$1.3536 or 0.40% up for the intraday session.
Read more: Crude Oil Price Forecast: Why Oil Bulls Are Gaining Confidence
--- Written by Diego Colman, DailyFX Research
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