After economy posts strong start to 2023, new data suggests slowdown has begun
OTTAWA –
The Canadian financial system’s sturdy bounce again firstly of the 12 months seems to have been short-lived, as new information suggests development is on a downward trajectory.
Statistics Canada mentioned Friday that the financial system grew by 0.1 per cent in February. Its preliminary estimates suggests actual gross home product grew at an annualized fee of two.5 per cent within the first quarter, and contracted in March.
RBC assistant chief economist Nathan Janzen mentioned the quarterly development, in comparison with the final decade, is a “respectable pace of growth.”
“But if you look at the monthly details, you just see that all of that increase came from January,” Janzen mentioned.
After a slowdown in business inventories introduced down development to zero within the fourth quarter, the Canadian financial system bounced again with 0.6 per cent development in January.
Meanwhile, February’s determine got here in decrease than was anticipated by Statistics Canada as wholesale and retail commerce in addition to manufacturing all contracted.
Boosting actual GDP in February was development within the public sector, skilled, scientific and technical companies, development and finance and insurance coverage.
An financial slowdown has lengthy been anticipated as rates of interest have climbed greater. And whereas some economists had anticipated that slowdown to seem earlier, indicators of weak spot at the moment are turning into extra obvious.
“After sprinting out of the gate to start 2023, the Canadian economy had already hit a wall by March,” CIBC economist Andrew Granthan wrote in a consumer notice.
The federal company’s preliminary estimate for March suggests the financial system contracted by 0.1 per cent.
The anticipated dip in actual GDP is pushed by continued declines in wholesale and retail commerce, along with mining and quarrying.
But Grantham mentioned the brand new information should not change a lot for the Bank of Canada’s outlook, which is holding its key rate of interest regular at 4.5 per cent, the very best it has been since 2007.
“Until there are clearer signs that slowing growth is also helping to ease core inflation, the Bank of Canada will continue to lean towards raising interest rates, even if a hike is not ultimately needed, with rate cuts not coming until 2024,” Grantham mentioned.
This report by The Canadian Press was first printed April 28, 2023.
