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The Quick Take: March 29, 2018

Canada’s GDP Contracts in January

Alicia Macdonald
Principal Economist
National Forecast

“Real GDP contracted 0.1 per cent at the start of the year following only moderate growth in December. Half of the main 20 industries recorded declines in production, reinforcing our view that the economy has slowed significantly compared to a year ago. Overall, this weak momentum at the start of the year suggests that the first quarter is on track to match the slow pace of growth seen over the last half of 2017.”

Real GDP contracted by 0.1 per cent in January, following a modest increase of 0.2 per cent in December. 

There was a sharp pull back in real estate, and rental and leasing output, reflecting reduced activity in housing resale markets. The output of real estate agents and brokers fell 12.8 per cent—its largest decline since November 2008.

The drop in resale activity was felt in other sectors as well with legal, accounting and related services output falling by 1.9 per cent.

A large decline was also observed in mining with production dropping in both the energy and non-energy mining segments.

Partially offsetting these declines were advances in wholesale and retail trade, and gains in the construction and manufacturing industries.

Overall, this weak momentum at the start of the year suggests that the first quarter is on track to match the slow pace of growth seen over the last half of 2017 as forecast in our latest Canadian Outlook. This weak start to the year also reinforces our expectation that the Bank of Canada will remain cautious in lifting interest rates despite firming inflation with the next increase expected in July.

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