Heating up of the Canadian economy may push expectations for a first rate cut further down the line
Canada’s real gross domestic product grew 0.2 per cent in November and early estimates suggest December growth was even stronger, a sign of economic resilience that some economists say could take the pressure off the Bank of Canada to cut interest rates.
The November result — which marked the first monthly GDP increase since May — topped the consensus forecast and also came in above an advance reading of a 0.1 per cent gain.
The national statistics agency said most of the growth came from goods-producing industries, including manufacturing and wholesale trade, which saw their biggest gains since January 2023.
Bank of Montreal chief economist Douglas Porter said since those sectors are heavily influenced by exports, “it seems that the surprising resiliency in the U.S. economy is indeed spilling over into some sectors in Canada.”
Gains in both non-durable and durable goods manufacturing helped the sector chalk up the biggest contribution to the monthly GDP gain, noted TD economist Marc Ercolao.
Wholesale trade rebounded by 0.7 per cent after two months of declines.
A preliminary estimate of 0.3 per cent growth in December means GDP may have increased 0.3 per cent in the fourth quarter after posting a decline in the third quarter. That would bring economic growth in 2023 to 1.5 per cent, the statistics agency said.
“Canada had a far firmer growth backdrop to end 2023 than expected, and this points to an upward revision to 2024 estimates,” BMO’s Porter wrote.
If December’s estimate is close to accurate, there’s much more momentum heading into 2024 than was expected, he said. That could also mean less pressure on the Bank of Canada to start cutting interest rates any time soon.
“This solid result, after a long dry spell for growth, affords policymakers the ability to gently push back on easing chatter, as they wait for underlying inflation to come down further,” Porter said.
Royal Bank of Canada economist Claire Fan, however, cautioned that the re-acceleration of growth should be taken with a grain of salt, noting that early GDP estimates have been highly revision-prone and other data have been softer.
She added that a lot of the strength in November was due to one-off factors that are unlikely to be repeated in the following months. These include recoveries from earlier factory shutdowns, like those in the chemical and metal sub-sectors, and strike activities, such as the workers strike at the St. Lawrence seaway.
“Overall we continue to expect pressures from elevated interest rates to curb consumer demand, stalling growth in both output and inflation over the first half of 2024 before the Bank of Canada is expected to cut rates in June,” Fan wrote.
Ercolao of TD Economics said markets are still focused on the timing of rate cuts, but a heating up of the Canadian economy may push expectations for a first cut further down the line.
While the Bank of Canada remains in a holding pattern as it awaits confirmation that inflation will decisively settle at their two per cent inflation target, he wrote, “strong data prints like November’s GDP release will be keeping the Bank on their toes.”
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.
The Canadian Press. All rights reserved.
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.
The Canadian Press. All rights reserved.
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.
The Canadian Press. All rights reserved.
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