MNI: Canada Q1 GDP Unexpectedly Stalls, April Flash Up 0.4%

Canada's first-quarter GDP was unexpectedly flat on a jump in gold imports to lag the central bank's 1.5% annualized growth forecast, while the second quarter showed a rebound with a flash estimate of 0.4% expansion in April. 

Output was "unchanged" on a quarter-over-quarter basis Statistics Canada said Friday, though that translates into a decline of 0.1% at an annualized rate. Fourth-quarter output was also revised down to a 1% annualized decline from the initial 0.6% contraction, or a quarter-over-quarter decline of 0.2%.

Imports gained at the fastest pace in four years in the first quarter with a 12% annualized rise led by gold, and excluding that inbound shipments increased at less than half the pace. Weakness was still broad as exports fell 0.5%, business spending on equipment fell 3.2% and household spending growth slowed by half to 1.5%. Final domestic demand fell at a 0.4% pace.

The report undercuts signs Canada's economy was holding up well against U.S. tariffs as high as 50% on industries such as autos, metals and lumber imposed last spring. Bank of Canada Governor Tiff Macklem cut rates four times last year and his most recent decision to hold said he could reduce again if there is major new trade damage. He also said consecutive hikes may be needed if oil prices trigger broader inflation. Economists predict a hold this year while investors see a potential hike. 

Today's figures suggest the slack that Bank officials say gives breathing room against inflation remains in place. While oil prices pushed inflation above the Bank's 2% target core measures are around that mark. The Bank says its policy rate is also at the bottom of its neutral range. 

On the plus side April's flash figure showed the biggest gain since July. That suggests a second-quarter rebound, and higher oil prices should also aid Canada's energy industry. The mix of figures will keep alive debate about whether Canada is in a technical recession, though many economists would also look at other indicators such as the job market and future revisions to GDP figures. 

First-quarter exports were aided by energy but U.S. tariffs also triggered a decline in auto shipments, StatsCan said. Business investment fell for the fifth straight quarter on weak equipment spending and fewer residential projects. Households also cut back on foreign travel and new auto purchases.