On a year-over-year basis, GDP shrank by 1.7 percent. "This is one of the most convincing signs so far that the Canadian recovery is for real," said Doug Porter, deputy chief economist at BMO Capital Markets. Even if December GDP is flat, which is unlikely, the economy is on track to grow by over 3.5 percent in the fourth quarter, Porter said.
The Canadian dollar climbed against the US dollar after the data was released. By mid-morning, the Canadian dollar was at C$1.0630 to the US dollar, or 94.07 US cents, up from about C$1.0676 or 93.67 cents before the data The new numbers came as Statscan revised its historical employment data, revealing the economy created slightly fewer jobs in the fourth quarter than previously reported, although the unemployment rate was also lower.
The revisions to the labour force survey data showed employers shed 28,300 workers in December, not 2,600 as initially reported, said Jeannine Usalcas, an analyst at the labour division unit of the federal agency. But the unemployment rate is now reported at 8.4 percent throughout the quarter.
Statscan originally reported an 8.5 percent jobless rate for December and November and 8.6 percent for October. The net result of changes to the three month period from October-December was about 12,600 fewer jobs created - not considered a significant number. The federal agency revised all of its historical data using a new seasonal adjustment method that replaces the one used since 1980.
SENTIMENT IMPROVES Economists had taken the December job losses as confirmation the recovery would be sluggish but the GDP data appeared to have lifted investors' mood somewhat. After disappointing third-quarter annualised growth of just 0.4 percent, the Bank of Canada predicted this month that the recovery would gain momentum in the fourth quarter and growth would peak in the second quarter at 4.3 percent growth.
If the United States is any barometer - Canada relies on its neighbour to buy three-quarters of its exports - those estimates should not be far off. The US economy grew at a 5.7 percent pace in the fourth quarter, the quickest in more than six years. In November, goods-producing industries grew 0.6 percent even as the heavyweight manufacturing sector stagnated. Mining and oil and gas extraction led the gains with a 1.8 percent jump, followed by construction with a 1.1 percent rise.
The services industry, which had been more resilient during the recession, advanced 0.4 percent in November. Wholesale trade jumped 2.4 percent on strength across all major trade groups, Statscan said. Meanwhile, the producer price index showed lesser inflationary pressures in December. Lower oil prices and a strengthening Canadian dollar knocked producer prices down by 0.1 percent in December. Raw materials prices fell 1.7 percent.