Canadaâ€™s economy may be returning to health after an oil shock, but keeping up that momentum could hinge on whether manufacturers show more resilience. Gross domestic product grew 0.4 percent in November after a surprise 0.2 percent contraction the prior month, Statistics Canada said, and advances in exports and jobs have economists projecting fourth-quarter growth at a 1.6 percent annual pace. Yet factories weigh on the outlook: despite a November rebound, they still arenâ€™t growing steadily enough to serve as a reliable economic engine.
Bank of Canada Governor Stephen Poloz kept alive talk of an interest-rate cut at his last decision Jan. 18, citing uncertainties such as US President Donald Trumpâ€™s protectionist slant.
That puts another cloud over the potential for Canadaâ€™s factory production to ramp up after years of struggling to keep US market share.
Canada this year will only see â€œa modest acceleration in non-energy export growth,â€™â€™ according to Jesse Edgerton, an economist at JPMorgan Chase & Co. in New York. He cited suppliers who have lost orders through the oil shock and â€œthe decline in competitivenessâ€™â€™ against other nations.
Canadaâ€™s dollar has also crept back into the picture as an obstacle, with Poloz saying its recent rally was looking to be a bit too much. The currency is the third-best performer against the US dollar over the last three months with a 2.3 percent gain.
The problem is that manufacturing output has gone sideways for more than two years and is a smaller part of the economy, making it harder to drive future growth. Manufacturing, like the countryâ€™s battered energy industry, may not be ready deliver a huge jolt of momentum.