Canada's gross domestic product shrank by 0.1 per cent in January, a weak showing, but better than what economists had been expecting.
Statistics Canada said Monday the service sector declined by 0.3 per cent even as the goods-producing industry rose by 0.3 per cent.
'This is better than expected.' - Scotiabank's take on the weak GDP showing
After shrinking in December, oil and gas production actually increased 2.6 per cent in January as Canada's oil producers kept pumping oil despite low prices.
"Scratching under the surface, not all is well in the oil and gas segment (of course)," Scotiabank said in a research note after the data came out. "Support activities for mining, oil and gas fell by two per cent month over month [and] activity in traditional oil and gas extraction fell."
All the growth came from non-conventional oil and gas extraction (such as oilsands oil), which can be more volatile.
David Madani at Capital Economics said the 0.1 per cent contraction was better than he was expecting, but he doubts it is sustainable. "We still think that the sharp drop in oil prices will be more negative for Canadian economic growth and underlying inflation than the [Bank of Canada] is hoping for. Accordingly, we still expect another 25 basis point rate cut at some point soon," he said in a note to clients.
On the services side, just about everything was smaller, but the data agency attributed the drop to decreases in wholesale and retail trade and — to a lesser extent — in transportation and warehousing services, accommodation and food services.
Still, the overall 0.1 per cent contraction was better than the consensus of expectations, which was for a 0.2 per cent contraction.
"This is better than expected," Scotiabank said. "Sometimes bad news (today's negative GDP print) can be good news (it wasn't worse)."