Economy

Canada's economy poised to grow in the first quarter, dodging America's fate – Financial Post

Published

2 years ago

April 29, 2022

Harry Miller

Latest growth numbers just support the case for larger Bank of Canada hike

Publishing date:

Apr 29, 2022 • 1 hour ago • 3 minute read • 20 Comments

Canada’s economy grew by 1.1 per cent in February from the month before, the largest growth rate in almost a year, Statistics Canada said Friday. Photo by Cole Burston/Bloomberg

Canada will face growing economic headwinds with considerable momentum.

Statistics Canada on April 29 reported that gross domestic product grew 1.1 per cent in February, and the agency estimated the economy likely expanded 0.5 per cent in March, suggesting Canada pushed through the Omicron wave with relative ease.

That wasn’t a given at the end of last year. Many assumed strict health restrictions in Ontario and Quebec over the winter months would kill economic activity, as they had at previous times during the pandemic. The Bank of Canada cited uncertainty over COVID-19 as one of the reasons it opted against raising interest rates in January, even though inflation had surged well above the high end of its comfort zone.

Now, the strength of Canada’s economy is giving the central bank reason to accelerate interest-rate increases. Policymakers earlier this month said GDP likely expanded at an annual rate of three per cent in the first quarter, compared with a January estimate of two per cent. Statistics Canada’s monthly tallies of economic output are calculated differently than its quarterly assessments, but the former generally aligns with the latter. GDP grew about 0.5 per cent from December to January, suggesting the quarterly rate of growth will exceed five per cent, economists said.

“Today’s GDP report reinforces the view that the momentum in Canada’s economy is unrelenting,” James Orlando, a senior economist at Toronto-Dominion Bank, said in a note. “Compared to our neighbour to the south and our global peers, Canada is clearly outperforming.”

Indeed, the first of three estimates of first-quarter growth in the United States by the Commerce Department this week showed the world’s largest economy shrank at an annual rate of 1.4 per cent, surprising most Wall Street forecasters, who were expecting an increase. Canadian bond yields rose after Canada’s numbers were released, suggesting investors anticipate evidence of stronger growth will keep pressure on the Bank of Canada to raise its benchmark rate at a relatively aggressive pace as it tries to catch up to inflation.

“Pressure continues to build for the Bank of Canada to ease off the monetary policy accelerator more rapidly,” Claire Fan, an economist at Royal Bank of Canada, told clients, adding that a second consecutive half-point increase is “looking increasingly likely” at the central bank’s next policy announcement on June 1.

GDP got a boost from some predictable sources. Restaurants and hotels led the way, as the lifting of health restrictions led to a 15 per cent increase in output by the food and accommodation industry, Statistics Canada said. Oil producers and miners posted a 3.4 per cent gain, the biggest since the end of 2020, as companies benefited from increased demand and higher prices. Construction and “computer systems design,” a proxy for the digital technology industry, also posted notable increases.

The surprising momentum could be tested in the months ahead, because a growing number of signals suggest global inflation, ongoing supply disruptions and uncertainty over the war in Ukraine could slow the recovery from the COVID-19 recession. Amazon.com Inc. on April 28 said it had downgraded its outlook amid rising costs and weaker demand for the goods it sells online. And Bank of Canada governor Tiff Macklem indicated in parliamentary testimony this week that he’s wary of what recent COVID-19 lockdowns in China portend for global growth and supply-side inflation.

Indeed, it isn’t difficult to find economists who think Canada and other big economies are setting up for another recession. But such speculation won’t stop the Bank of Canada from raising interest rates in the short term, since Macklem told lawmakers that he and his deputies will be considering another half-point increase when they next gather to decide on the benchmark-rate setting.

“The Canadian economy is in good shape,” he told the House finance committee on April 25. “It can handle higher interest rates. It needs higher interest rates.”

• Email: kcarmichael@postmedia.com | Twitter: carmichaelkevin

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Economy

Energy stocks help lift S&P/TSX composite, U.S. stock markets also up

Published

1 day ago

September 17, 2024

Anne Joseph

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.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

Canada’s inflation rate hits 2% target, reaches lowest level in more than three years

Published

1 day ago

September 17, 2024

Anne Joseph

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.

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Economy

Federal money and sales taxes help pump up New Brunswick budget surplus

Published

2 days ago

September 16, 2024

Anne Joseph

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.

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