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Charting the Global Economy for Week Ending April 1  Bloomberg



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OTTAWA — Economic growth resumed in January and came in better than first expected following a small contraction in December, Statistics Canada said Friday.

Real gross domestic product rose 0.5 per cent to start the year, the agency said, beating its initial estimate for a gain of 0.3 per cent for the month and reversing a contraction of 0.1 per cent in the final month of 2022. 

Statistics Canada also said its initial estimate for February indicates growth continued with a gain of 0.3 per cent, though it cautioned the figure will be updated.

“There were many indications that the economy got off to a solid start in 2023, but today’s double-barrelled blast of strength is well above even the most optimistic views,” BMO chief economist Douglas Porter wrote in a report.

“Even if growth stalls in March, it now looks like Q1 will post growth of 2.5 per cent, up from a flat read in Q4. While we continue to look for a notable cooldown in the next two quarters, we are bumping up our GDP growth estimate for all of 2023 by three ticks to 1.0 per cent.”

The growth in January came as goods-producing industries gained 0.4 per cent for the month, while services-producing industries rose 0.6 per cent.

Statistics Canada said many of the main drivers for growth in January also contributed the most to the decline in December.

The wholesale trade, transportation and warehousing, and mining, quarrying and oil and gas extraction sectors all rebounded after falling in the previous month.

Wholesale trade gained 1.8 per cent in January, helped by wholesalers of machinery, equipment and supplies, while the mining, quarrying and oil and gas extraction sector grew 1.1 per cent after falling 3.3 per cent in December.

The transportation and warehousing sector added 1.9 per cent in January, more than offsetting a drop of 1.1 per cent in December that was due in part to bad weather.

This report by The Canadian Press was first published March 31, 2023.

The Canadian Press

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Canada’s economy kept growing at the start of this year, defying expectations of a stall and eventual technical recession in the face of the highest interest rates in 15 years.

Preliminary data suggest gross domestic product expanded 0.3 per cent in February, Statistics Canada reported Friday in Ottawa, led higher by oil and gas, manufacturing, and finance and insurance sectors. That followed a 0.5 per cent expansion in the previous month, stronger than expectations for 0.4 per cent growth in a Bloomberg survey.

The Canadian economy is now on track to expand at an annualized rate of 2.8 per cent in the first quarter, assuming growth in March comes in flat. That’s much more robust than the 0.5 per cent annualized pace forecast by the Bank of Canada in January, when it signaled a conditional rate pause. 

“Today’s double-barreled blast of strength is well above even the most optimistic views,” Bank of Montreal Chief Economist Doug Porter said in a report to investors. “Suffice it to say that if the strength seen in the opening months of the year persists, the BoC is going to find itself in a tough spot.”

Canada’s currency reclaimed nearly all of its losses after the release and bonds rallied. The yield on benchmark government two-year debt fell more than 3 basis points to 3.777 per cent at 9:50 a.m. in Ottawa. 

The data suggest while some rate-sensitive sectors like housing have already cooled, overall economic growth is still holding up better than expected. It’s also at odds with a flurry of early estimates released last week that suggested a pullback in economic activity, with retail, wholesale and manufacturing sales all falling in February.

Friday’s numbers will test Governor Tiff Macklem and his officials as they look for evidence that monetary policy is sufficiently restrictive to bring inflation back to the central bank’s 2 per cent target. An accumulation of stronger-than-expected data may prompt them to stay on the sidelines for longer or even hike again.

Traders in overnight swaps markets, however, are betting the Bank of Canada’s next move will be a cut, given turmoil in global financial markets after the failure of regional U.S. lenders and a government brokered takeover of a European banking giant.

Economists in a monthly Bloomberg survey see 1 per cent annualized growth in the first three months of this year. But that’s expected to be followed by two straight quarterly contractions.

During deliberations for the central bank’s March 8 decision to hold rates steady for the first time in nine meetings, policymakers said they saw “clear signals” hikes so far were curbing demand. But there are few signs in recent data that the economy is gearing down.

Both goods-producing and services-producing industries were up in January, with nearly all sectors posting increases, except agriculture, utilities and management of companies.

Rebounds in several industries drove the January gain. Many of the key growth drivers were the largest contributors to December’s 0.1 per cent decline, including wholesale, transportation, and oil and gas industries. Accommodation and food services activity was also a key contributor.

“The Bank of Canada is likely at a crucial juncture and facing a significant dilemma,” Charles St-Arnaud, chief economist at Credit Union Central Alberta Ltd., said in a report to investors. “The central bank may have to choose between fighting inflation and hiking interest rates again or focusing on financial stability and keeping rates on hold.”

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