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“This entire report is not likely to have much of an impact simply because the world has changed so much in recent weeks,” said Doug Porter, chief economist at BMO Capital Markets.

“Officially we would not have them cutting next week, but we do think it’s a matter of time now,” he said by phone.

Market expectations of a rate cut in March – which jumped to 70 per cent just before the data was released, up from less than 30 per cent in just a few days – edged down to 59 per cent.

In an indication of challenges to come, Statscan said producer prices dropped 0.3 per cent in January, in part because coronavirus was hitting demand for oil, one of Canada’s main exports. Raw material prices fell by 2.2 per cent for the same reason.

The fourth quarter growth figure was the worst since a 2.0 per cent drop in the second quarter of 2016, when wildfires hit an oil-producing region.

Statscan cited pipeline shutdowns, bad harvest conditions, an eight-day railway strike in Canada, the spillover effect of a U.S. auto workers’ strike and global trade tensions.

Household spending on services jumped by 0.8 per cent over the third quarter while business investment in machinery and equipment fell by 3.6 per cent, the third consecutive decline. Export volumes dropped by 1.3 per cent.

December growth, though, was 0.3 per cent, greater than the 0.1 per cent the markets had been expecting, a fact that TD Securities macro strategist Robert Both described as encouraging.

“It gives a little bit more momentum heading into the first quarter. … If the bank was looking to the data for a reason to cut this morning, I don’t think they found one,” he said.

The Canadian dollar barely changed against the U.S. dollar, weakening slightly to C$1.3445, or 74.38 U.S. cents.

© Thomson Reuters 2020