CANADA DATA: Growth Momentum Stalled Badly In Q4

StatCan's November GDP by industry report underlined that activity in Q4 looks to have been flat at best, though likely contracted modestly.

• The 0.0% M/M November outturn was actually slightly contractionary (-0.02% unrounded) and lower than the advance estimate of 0.1% (albeit up from October's -0.3%), with goods-producing industries continuing to struggle with a 0.3% decline offset by a 0.1% rise in services.
• A 1.3% fall in manufacturing was attributed by StatCan to "supply chain bottlenecks" including a semiconductor shortage curtailing auto output but either way durable goods manufacturing is back to 2011 levels. (This is likely referring to a Honda plant in Ontario.)
• Retail trade rose 1.3%, rebounding partly due to the end of a labor disruption at liquor stores in British Columbia, with wholesale trade down 2.1%, the biggest drop since April, due in large part to auto sector difficulties.
• Elsewhere, agriculture/forestry/fishing/hunting fell 1.1%; transportation/warehousing rose 0.9%; and public sector activity rose 0.4% (again helped by the end of a work stoppage).
• December's advance estimate was little better at +0.1%, with " Increases in manufacturing and wholesale trade ... partially offset by decreases in mining, quarrying, and oil and gas extraction".
• These industry figures don't map perfectly with the overall quarterly GDP reading (which for Q4 is due out on Feb 27) but implies Q4 GDP pulled back sharply vs the 2.6%  Q/Q SAAR in Q3 even though there was a very slight upward revision to October at -0.28% M/M vs -0.34% which helped offset the November miss.
• Mechanically GDP by industry points to a Q4 contraction of 0.5% Q/Q SAAR (-0.48% unrounded) which would be below the BOC's 0.0% estimate and 0.3% consensus but the actual GDP by expenditure reading can differ significantly from the industry data at times of volatile net trade (Q3 industry was +2.1% but actual was +2.6%). The latter is tracking positively for Q4 so the published contraction may not turn out to be quite as acute but clearly there has been little evident momentum in the activity data.
• That shouldn't be a game-changer for the BOC will still require some kind of shock to move off the sidelines on rates in the near future, but continued weak activity readings will reinforce markets' bias toward an easing being more likely than a tightening at least in the first half of 2025.