The economy grew at an annualized rate of 3.1 per cent in the first quarter, helped by business investment and household spending, Statistics Canada said Tuesday.
The result was down from an annualized rate of 6.6 per cent in the fourth quarter of 2021.
Statistics Canada said the change came as export volumes dropped 2.4 per cent for the quarter, following two consecutive quarterly increases.
Paul Ashworth, chief North American economist at Capital Economics, said the growth for the first three months of the year was well below the consensus estimate, but broadly in line with the Bank of Canada’s April monetary policy report.
“The unexpected weakness in first-quarter GDP growth was principally due to a downward revision to the January data, which now shows a 0.2 per cent month over month decline, as the Omicron-related restrictions had a bigger impact than previously thought,” Ashworth wrote in a report.
However, he said the real economy remains on a strong footing, which means the Bank of Canada can press ahead with raising its key interest rate by half a percentage point on Wednesday.
Statistics Canada said household spending rose 0.8 per cent in the first quarter, to mark a third consecutive quarterly increase.
Spending on durable goods gained 2.6 per cent in the first quarter, helped by a 16.1 per cent increase in spending on new passenger cars and a 3.5 per cent gain for new trucks, vans and sport utility vehicles.
7:27 Pitch to fire Bank of Canada governor ‘oversimplifies’ inflation: Page
Pitch to fire Bank of Canada governor ‘oversimplifies’ inflation: Page – May 15, 2022
However, Statistics Canada noted that despite the increases, spending on automobiles remained lower than pre-pandemic levels, as supply chain issues continued to hurt the auto sector.
Residential construction gained 4.3 per cent as spending on renovations rose 9.3 per cent, resale costs gained 4.6 per cent and new construction rose 0.2 per cent.
Business investment in non-residential structures rose 2.9 per cent and in machinery and equipment gained 0.9 per cent in the quarter, while spending on engineering structures rose 3.5 per cent.
Statistics Canada also said compensation of employees rose 3.8 per cent on a nominal basis for the quarter. Excluding the third quarter of 2020, it said it was the largest quarterly increase since the second quarter of 1981.
The agency said significant wage growth was seen across the economy, including in professional and personal services, trade, manufacturing, health care and social assistance and construction industries.
The overall growth for the first quarter came as the economy grew 0.7 per cent in March.
Statistics Canada said its preliminary reading for April indicates the economy grew 0.2 per cent for the month, but cautioned the figure would be revised when it releases its official figure on June 30.
The reading on the economy comes ahead of the Bank of Canada interest rate announcement on Wednesday.
The central bank is expected by economists to raise its key interest rate target by half a percentage point to 1.5 per cent in an effort to slow inflation.
In its April monetary policy report, the Bank of Canada had forecast an annualized growth rate of 3.0 per cent for the first quarter.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
