CIBC Research discusses its reaction to today's Canada Q4 GDP report.
"The "R" word will be on minds as Canada's economy barely skirted the start of a recession in Q4. Growth slowed to only 0.4% annualized, about a half point below consensus, and final domestic demand was in the red with a 1.5% pace of decline. Add to that a 0.1% drop in GDP in December, pointing to a weak handoff for the first quarter. If not for a huge employment gain in January we'd be worried about an outright recession, but at this point, its best described as a stalled engine. The weakness was in both residential and business capital spending, as well as a dip in exports. December's softness came from a broad based drop in goods production," CIBC notes.
"Obviously a weak reading, making next week's Bank of Canada meeting of interest only to the extent that Governor Poloz pulls further back from his talk about normalizing rates towards 3%, which has been very off message relative to the data. Negative for the C$, bullish for short rates," CIBC adds.