Canada's Economic Setback: Slow Growth Amid Inventory Drawdown

Canada's economy contracted by 0.6% in Q4, marking the slowest growth since COVID-19 in 2020. Inventory depletion and decreased residential investment contributed to the downturn, despite positive exports and government investment. GDP is likely to remain stagnant into January, according to Statistics Canada.

Canada faced an economic setback as the country's economy contracted by 0.6% in the fourth quarter, falling short of expectations. The contraction marks the slowest annual growth since the pandemic in 2020, led by a heavy drawdown in inventories as manufacturers relied on stockpiled goods to meet demand.

Despite a modest uptick in exports and household spending, and increased government investments, the overall growth could not counterbalance the significant reductions in inventories amounting to C$23.46 billion. Residential investments also declined by 4.4%, further impacting the GDP.

Looking forward, Statistics Canada anticipates a stall in GDP growth into January, with a potential for data revision. This slow growth phase keeps the Canadian dollar and bond yields relatively steady, although highlighting an overall cautious economic outlook.

(With inputs from agencies.)