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Canada's economy grew by more than expected in first quarter, upping odds of rate hike next week – CBC.ca

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The Canadian economy grew at an annualized rate of 3.1 per cent in the first quarter of 2023, Statistics Canada reported Wednesday.

The latest data shows growth beat out the federal agency’s own forecast of 2.5 per cent for the quarter. A preliminary estimate suggests the economy grew by 0.2 per cent in April, after remaining flat in March.

The ongoing resilience in the economy will likely spur discussions of a potential rate hike, as the Bank of Canada is expected to make its next interest rate announcement next week.

The relatively strong GDP showing had investors increasing the odds of a rate hike when the central bank meets next week. Prior to the GDP numbers, trading in investments known as swaps was implying a litle over a one-in-four chance of a hike. 

Now, those odds are better than one-in-three.

Statscan says growth in exports and household spending helped spur growth in the first quarter. On the other side of the ledger, slower inventory accumulations as well as declines in household investment and business investment in machinery and equipment weighed on growth.

Tuan Nguyen, an economist with consulting firm RSM Canada, says the GDP numbers “blew past expectations.”

“After a slow final quarter of last year, the Canadian consumers and businesses came out strong in the first quarter, defying rising recession concerns that most market participants have been talking about,” Nguyen said. “There is no doubt that the data pointed to a hot economy, explaining why underlying inflation has remained elevated.”

Stubbornly high inflation

The Canadian economy has managed to continue outperforming expectations, despite the Bank of Canada hoping high interest rates would cause a more profound pullback by consumers and businesses.

The household spending figures show spending up on both goods and services in the first three months of the year, after minimal growth in the previous two quarters.

However, the report notes disposable income fell for the first time since the fourth quarter of 2021. The federal agency says disposable income declined by one per cent, largely due to the expiration of government measures aimed at helping people cope with inflation.

The central bank paused its rate-hiking cycle earlier this year, keeping its key interest rate at 4.5 per cent — the highest it’s been since 2007.

But the central bank’s governor, Tiff Macklem, has signalled that the bank is still trying to figure out if interest rates are high enough to quash inflation.

The headline inflation rate ticked up slightly to 4.4 per cent in April, remaining well above the central bank’s two per cent target. 

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Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

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VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

The Canadian Press. All rights reserved.

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Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

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NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

The Canadian Press. All rights reserved.

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Economy

Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

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HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

This report by The Canadian Press was first published Sept. 10, 2024.

The Canadian Press. All rights reserved.

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