By Leah Schnurr
OTTAWA, Dec 23 (Reuters) - The Canadian economy stalled in
October, while retail sales rose less than expected, the latest
signs that the country was struggling to regain momentum shortly
after emerging from a mild recession.
The data released on Wednesday raised the possibility growth
in the fourth quarter could fall short of the Bank of Canada's
expectations and prompt another interest rate cut in the new
year.
Gross domestic product was unchanged in October, Statistics
Canada said, missing forecasts for a gain of 0.2 percent
following September's 0.5 percent decline.
Canada was in a mild recession in the first half of 2015,
hit by the shock of cheaper oil, a major export. Although growth
resumed in the third quarter, the final quarter has had a weak
start.
Activity in the oil and gas extraction sector rebounded in
October from a sharp drop due to production difficulties and
shutdowns. That was offset by a decline in manufacturing, as
well as a drop in the utilities sector as parts of the country
experienced unusually warm weather.
The Bank of Canada cut rates twice this year to bolster the
economy. It sees the economy growing at a 1.5 percent rate in
the fourth quarter. Economists said that is now looking too
optimistic.
"The final quarter of the year is looking rather dismal for
the Canadian economy," said David Tulk, chief Canada macro
strategist at TD Securities.
"The wider backdrop of falling oil prices and renewed
caution among businesses investing in the oil sands suggests the
risk of an extended slowdown heading into Q1 remains
significant," he said, adding that the chance of a rate cut in
the first quarter "has grown appreciably."
For now, the central bank is widely seen holding rates when
it meets in January, with markets pricing a 15 percent
likelihood it will cut rates to 0.25 percent. BOCWATCH
The Canadian dollar hit a session low against the greenback
immediately following the data but then firmed as oil prices
climbed. CAD/
Separate retail sales figures also disappointed, with
sales edging up 0.1 percent, missing forecasts for a 0.4 percent
gain. Volumes fell 0.3 percent.
A decline at food and alcohol stores tempered increased
purchases of motor vehicles and clothing.
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Graphic - Canada monthly GDP, exports to the U.S. http://link.reuters.com/jev87s
Graphic - Canada economic dashboard http://graphics.thomsonreuters.com/15/sc-canada/index.html
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