The Canadian economy slowed to a 2.4 per cent annual growth rate in the last three months of 2014 — but still performed better than economists had expected.
The stronger than anticipated reading released Tuesday for the autumn period of falling oil prices was yet another sign the Bank of Canada could abstain from cutting its key interest rate at this week’s announcement.
The annualized rate for the fourth quarter of 2014 was close to the Bank of Canada’s 2.5 per cent prediction, but beat economists’ call of 2.0 per cent, according to Thomson Reuters.
Led by gains in manufacturing, the gross domestic product moved upward in December by 0.3 per cent compared to the previous month to beat economist expectations of 0.2 per cent, the Statistics Canada report found.
Statistics Canada found the oil and gas extraction sector was among the primary contributors to growth in the last three months of 2014, although it dropped off in the last two months of the year.
In a speech last week, Bank of Canada governor Stephen Poloz said January’s surprise rate cut bought the bank more time to assess how the plunge in oil prices might affect the economy, leading economists to dump cold water on the expectations of many that he would cut rates again this week.
The central bank stunned markets in January when it dropped its key rate by a quarter of a percentage point to 0.75 per cent. At the time, Poloz said the cut would buy insurance amid low crude prices that were “unambiguously negative” for the economy.
The latest Statistics Canada inflation data, also released last week, was higher than Bank of Canada had predicted — further dampening expectations of another cut.
However, the economy still cooled in the final months of 2014 compared to the 3.2 per cent result for the third quarter, the Statistics Canada report said Tuesday.
It recorded decreases in economic activity in areas such as machinery and equipment investment, communications and exports.
In addition, signs of the negative impacts of cheaper crude began to emerge in the last two months of 2014. The oil and gas extraction sector was down 0.8 per cent in November and 1.4 per cent in December.
Looking back at 2014, Canada’s gross domestic product increased by 2.5 per cent — slightly stronger than the Bank of Canada’s prediction of 2.4 per cent for the year. The country’s GDP rose by 2.0 per cent in 2013.
Statistics Canada also released revisions for the GDP readings of the first three quarters of 2014, which revealed the economy was stronger than earlier figures for the second and third quarters.
The second quarter had a revised reading of 3.8 per cent, compared to the previous figure of 3.6, while the third quarter was bumped upwards in the revision to 3.2 per cent from 2.8.