The increase matched both the forecast of analysts in a Reuters poll as well as the Bank of Canada's prediction. Statscan also revised the third quarter annualized growth down to 1.1% from an initial 1.3%.
Statscan cited pipeline shutdowns, bad harvest conditions, an eight-day railway strike in Canada, the spillover effect of a U.S. auto workers' strike and global trade tensions. The growth figure was the worst since a 2.0% drop in the second quarter of 2016, when fire ripped through an oil-producing region.
Household spending on services jumped by 0.8% over the third quarter while business investment in machinery and equipment fell by 3.6%, the third consecutive decline. Export volumes dropped by 1.3%.
The Bank of Canada's next interest rate decision is on March 4 and market expectations of a cut have jumped as the economy faces challenges from rail blockades and a coronavirus outbreak. The central bank has left rates unchanged since October 2018.
(Reporting by David Ljunggren in Ottawa; Editing by Chizu Nomiyama)