Home Economy Canada's GDP grows: what economists say

Canada's GDP grows: what economists say

by SuperiorInvest

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The Canadian economy held firm in the final quarter of last year, expanding 1 percent on an annualized basis after contracting in the third quarter, Statistics Canada said Feb. 29.

Here's what economists say the latest gross domestic product numbers could mean for inflation and interest rates.

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Douglas Porter, BMO Economics

Rising exports and consumer consumption aside, the fourth quarter was largely “a sea of ​​red,” said Douglas Porter, chief economist at Bank of Montreal, in a note to clients, noting that Statistics Canada recorded contractions. in several sectors, including housing, business investment and public spending.

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Looking ahead to the first quarter of 2024, Porter said he is taking Statistics Canada's preliminary estimate for January with “a grain of salt,” given that the national data agency omitted the December report.

“Overall, it's not a bad set of results,” Porter said, although he added that the data reveals that “growth is hesitant and at times struggling to stay positive.”

The economist does not believe that these figures will move the interest rate needle.

“This changes little for the Bank of Canada, as conditions do not appear to be getting worse, so there is no urgency to cut rates,” he said. “With growth still well below potential, disinflationary pressure will continue, but will require continued patience.

Nathan Janzen, RBC Economics

The fourth quarter marked the sixth consecutive contraction in GDP per capita, Royal Bank of Canada assistant chief economist Nathan Janzen said in a note to clients. The quarter also ended on a “softer note,” with December GDP stable, below an initial estimate of 0.3 percent growth.

“Details were weak, with production supported by stronger external demand as exports increased while domestic demand…continued to weaken,” Janzen said after the data was released.

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Quarterly domestic demand contracted for the first time in a year, falling an annualized 0.7 percent.

Janzen doesn't believe there is enough weakness in the report to force the Bank of Canada to cut interest rates.

“The economy is not yet bottoming out in a way that would push the Bank of Canada to quickly shift to looser monetary policy,” he said. “But as the economy continues to show signs of weakening, inflation is likely to continue falling rather than rising…. Our base assumption is that the BoC will move to cut interest rates in June.”

Andrew Grantham, CIBC Economics

The “bounce” in Canada's GDP in late 2023 was mainly because the economy was “catching up,” said Andrew Grantham, an economist at the Imperial Bank of Commerce of Canada.

Flexible supply chains boosted exports and auto sales were the main driver of increased consumer spending in the quarter.

Although the fourth quarter ended on “a weaker note than expected,” the outlook for the first quarter of this year suggests an annualized GDP of 1.8 per cent, stronger than the Bank of Canada's most recent forecast, Grantham said. .

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“Given that inflation is actually below the Bank's January projections, today's data does not change our forecast for a first interest rate cut in June,” he said.

Stephen Brown, Economics of Capital

The latest GDP figures changed the Bank of Canada's forecasts, Stephen Brown, deputy chief North American economist at Capital Economics, said in a note. The central bank expected the economy to stagnate by the end of the year.

However, “there were mixed messages in the report,” Brown said, highlighting December's flat reading.

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Statistics Canada forecasts January GDP to grow 0.4 per cent month over month.

“As long as the latest flash estimate is not revised downward, that means the economy should probably achieve another modest expansion this quarter and reduces the chance that the bank will start cutting interest rates as soon as April,” he said. .

• Email: gmvsuhanic@postmedia.com

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