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Canada's economy contracts for 1st time in 8 months


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Canada's economy contracts for 1st time in 8 months

Canada's seasonally adjusted monthly GDP contracted 0.1% in October, the first decline in eight months amid steep falls in economic output in manufacturing and retail trade, data from Statistics Canada showed.

The Econoday consensus estimate was for no month-over-month growth in October.

Economic output in goods-producing sectors fell 0.5% in October, driven by a contraction in manufacturing, which declined 1.4% following a 0.4% decrease in September. This marked the fourth manufacturing contraction in five months.

Durable manufacturing fell 2.3% as eight of 10 subsectors posted declines, while nondurable manufacturing dropped 0.3% as five of nine subsectors declined.

A strike by the United Auto Workers at General Motors Co. in the U.S. partly led to the manufacturing contraction as some plants and parts manufacturers in Canada cut production. Earlier, manufacturing sales posted a greater-than-expected decline in October.

Services-producing industries posted no month-over-month growth, after logging a 0.2% increase in the prior month. Retail trade fell 1.1% in October, its steepest fall since March 2016. Transportation and warehousing rebounded by 0.6% following four consecutive months of declines.

On a three-month rolling-average basis, Canada's real GDP was up 0.2% in October, down from 0.4% recorded in September.

Year over year, the index rose 1.2% in October, with service-producing industries gaining 2% and goods-producing industries posting a 1.1% decline.

In its latest monetary policy decision, the Bank of Canada said Canadian GDP growth slowed as expected to 1.3% in the third quarter amid a decline in exports, but investment spending surprisingly showed strong growth, particularly in transportation equipment and engineering projects.

The central bank expects growth to pick up over the next two years, although trade conflicts and related uncertainty remain the biggest sources of risk to the outlook.

On Dec. 6, S&P Global Ratings raised Canada's real GDP growth forecast for the next year to 1.6% from a previously projected 1.4%.