Canada’s households and businesses showed resilience at the start of the year despite a drop in exports that dragged economic growth down below expectations.
Gross domestic product expanded by a 3.1 per cent annualized pace in the first quarter as exports fell due to temporary supply constraints in the oil sector. Domestic demand, however, jumped.
The expansion was less than the 5.2 per cent median estimate in a Bloomberg survey of economists, and weaker than preliminary data from Statistics Canada suggested. It was also down from a revised 6.6 per cent annualized rate in the final three months of last year.
Wednesday’s first-quarter data was nonetheless in line with Bank of Canada forecasts and is unlikely to alter the path for interest rate hikes. Markets expect a second half-percentage-point increase this week as officials move aggressively to wrestle inflation down from three-decade highs.
“Inflation remains the focus and that’s why we’re likely to get 50-bp hikes at each of the next two policy meetings, starting with tomorrow,” Benjamin Reitzes, head of Canadian rates and macro strategy at Bank of Montreal, said by email.
The Canadian dollar reversed losses from earlier in the day after the report, and was trading 0.1 per cent higher at CUS$1.2641 per U.S. dollar at 9:56 a.m. in Toronto.
Production Snarls Exports fell by an annualized 9.4 per cent at the start of 2022, in part due to a series of production disruptions in Canada’s oil sector that included COVID-19 shutdowns, cold weather issues and planned maintenance.
Domestic demand accelerated to 4.8 per cent annualized, up from 3.7 per cent in the fourth quarter on the back of stronger consumption and investment, in both housing and other sectors.
The numbers suggest households and businesses continued to spend, despite restrictions meant to contain the spread of the omicron variant, and rebounded quickly as authorities eased the lockdowns in February and March.
On a monthly basis, GDP rose for a 10th straight time in March, increasing by a stronger-than-expected 0.7 per cent. The expansion slowed in April, with Statistics Canada reporting a preliminary estimate of 0.2 per cent growth for the month.
Most components of domestic demand sped up in the first quarter. Consumption grew at an annualized pace of 2.9 per cent at the start of the year, up from 2 per cent in the fourth quarter, even with the restrictions.
Household spending was helped by a jump in worker compensation, which was up 3.8 per cent on a non-annualized basis thanks to “significant” wage growth, the statistics agency said. Excluding the third quarter of 2020, that’s the fastest pace since 1981.
Much of the gain in compensation wasn’t even spent, with the savings rate increasing to 8.1 per cent in the three-month period, up from the end of last year.
While oil volumes fell in the quarter, the nation’s economy still generated more receipts from the sector thanks to higher prices. Growth in nominal output rose 3.7 per cent on a non-annualized basis due to higher wages and profits.
Investment in housing jumped to an annualized 18.1 per cent in the first three months, up from 12.4 per cent in the fourth quarter. Spending in non-residential investment slowed slightly but remained at a robust 9 per cent annualized growth.
The nation’s economy also got a boost from higher inventory build up at the start of the year.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
