2018.04.0121:02:00UTC+00Canadian Economy Shrinks in January

The Canadian economy shrank in January amid a sharp decline in oil production, which implies that first-quarter growth is likely to underwhelm after surging in 2017.

Gross domestic product contracted 0.1 percent in January from the previous month, according to data released by Statistics Canada.

Compared to the same period last year, the Canadian economy expanded 2.7 percent, falling short of estimates for a 2.9 percent increase and the slowest pace of growth in 11 months.

January's output drop puts the economy on track for sub-2 percent growth for a third consecutive quarter. That would be the slowest stretch since 2015.

Canadian policymakers are bracing for a period of slower growth this year and recent reports on jobs and fourth-quarter GDP appeared to confirm the more muted pace of growth.

After leading the Group of Seven in economic growth in 2017, Canada is widely expected to slow this year as highly indebted households pare spending. That should keep some pressure off the Bank of Canada to raise interest rates.

On the bright side, Statistics Canada revised up its estimate for December GDP growth to 0.2 percent from 0.1 percent initially.

The monthly decline was the largest since May 2016, propelled by a 3.6 percent drop in oil and gas extraction. Statistics Canada cited a 7.1 reduction in oil sands production due to unscheduled maintenance shutdowns.