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Economy

Canada’s economy stumbles as GDP grows less than expected

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The economy was nearly stagnant in February and is expected to contract in March on the back of the nation’s largest strike.

The Canadian economy grew less than expected in February from the previous month and is expected to shrink in March, according to data that back up the central bank’s plans to keep interest rate hikes on hold.

February gross domestic product gained 0.1 percent from January, less than the 0.2 percent increase forecast by analysts, after an upwardly revised 0.6 percent expansion in January, Statistics Canada said on Friday. March GDP was most likely down 0.1 percent, Statscan said in a preliminary estimate.

The flash estimate for March, which may change when a final tally is released next month, means the economy likely grew 2.5 percent on an annualized basis in the first quarter. The Bank of Canada has forecast a 2.3 percent rise in real GDP in the first quarter.

“The Canadian economy looks to have stumbled in the early spring after a sprinting start to the year,” said Doug Porter, chief economist at BMO Capital Markets.

The largest strike in Canadian history, now in its 10th day, will affect this month’s growth, analysts said, with the overall impact being a weaker start to the second quarter than had been previously expected. The strike by federal government workers represented by the Public Service Alliance of Canada is affecting services ranging from tax returns to passport renewals.

“Against this backdrop, the Bank of Canada is expected to remain on hold, assuming inflation continues to recede and notwithstanding their tough talk on the possibility of further rate hikes,” Porter said.

The central bank, which had raised interest rates at a record pace over the past year to cool the economy and bring prices down, was the first major central bank to pause its tightening campaign and said it would not raise rates if inflation continued to ease as expected.

The bank this month left its key policy rate at a 15-year high of 4.5 percent for a second time in a row but struck a hawkish tone, playing down market expectations for a cut this year as the risk of a recession diminished.

The bank expects positive but weak growth during the remaining three quarters of this year. At its meeting this month, it even discussed raising rates because of stronger-than-expected growth, a tight labour market and concerns about inflation in the services sector.

“While a weakening economy should prevent policymakers pulling the trigger on another interest rate hike, we don’t see cuts forthcoming until early next year,” said Andrew Grantham, senior economist at CIBC Economics

Canada’s goods-producing sector expanded 0.1 percent in February while the service-producing sector also posted a 0.1 percent rise.

February’s gains were helped by growth in the public, construction, finance and insurance sectors while the wholesale and retail trade sectors were drags.

In March, GDP was likely impacted by decreases in the retail and wholesale trade sectors, Statscan said.

The Canadian dollar was trading 0.3 percent lower at 1.36 to the greenback, or 73.37 US cents, after touching its weakest value in one month.

 

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

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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.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

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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.

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Economy

Statistics Canada says manufacturing sales fell 1.3% to $69.4B in August

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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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