Canada’s economy is showing signs of underlying strength as some consumers and businesses brush off recession fears, a flurry of data releases on Friday suggest.
Some economists say the door is open for the Bank of Canada to pause its rate hike cycle once again amid easing inflation concerns and an expected economic slowdown in the second half of the year, while others feel it’s still too soon for the central bank to declare victory.
The country’s GDP growth was “essentially unchanged” in April, according to Statistics Canada’s report on for the month, revised down from early estimates for 0.2 per cent growth in the month.
Drags from the public sector strike and a slowdown in manufacturing were offset by strength in the mining and oil and gas sectors, StatCan said. The real estate industry, too, pulled up GDP as the housing market continue its spring rebound.
Statistics Canada also revised up its earlier estimate for March, swinging the month’s GDP to a modest gain of 0.1 per cent compared to a slight dip of 0.1 per cent.
Statistics Canada’s flash estimate for May shows 0.4 per cent GDP growth is expected for the month. But that number could be revised.
Where is the recession?
Capital Economics’ deputy chief North America economist Stephen Brown tells Global News that, stripping the impact of the strike from the GDP data, the economy likely would have grown roughly 0.1 per cent in April.
Add that to early estimates of a solid rebound in May, and Brown says “it’s a sign the economy is enjoying some renewed momentum.”
BMO chief economist Doug Porter said in a note Friday morning that despite calls for a slowing in Canada’s economy this year, the country has not posted a single month of negative growth so far in 2023.
Even one of the largest strikes in years couldn’t drag the country’s economy into a contraction, he noted, suggesting the Bank of Canada’s rapid interest rate hikes over the past year and expectations of a global slowdown in demand have not meaningfully slowed Canada’s momentum.
“The bigger picture is that the Canadian economy is managing to keep its head above water in the face of many challenges,” he said.
BMO revised up its GDP expectations for the second quarter of the year to 1.5 per cent in the face of Friday’s data, up from 0.8 per cent earlier.
CIBC senior economist Andrew Grantham said in a note to clients shortly after the GDP release on Friday that the second quarter of the year is tracking for annualized growth of 1.4 per cent, just above the Bank of Canada’s forecast of 1.0 per cent in the period.
Brown noted that surging population growth is responsible for much of Canada’s GDP strength. The country set a record for immigration in the first quarter of the year, which is helping population growth outpace GDP growth, he says.
That’s a sign that the Bank of Canada’s efforts to slow demand in the economy is having an impact on a per capita basis — affecting individual households — but not weakening the overall economy as much as expected, Brown argues.
“We are seeing weakness. The economy is weakening on a per person basis,” he says.
“It’s just because the aggregate is growing by so much because so many people are coming into the country. But that’s what’s determining the overall GDP picture.”
Tuan Nguyen, economist with RSM Canada, said in a note on Friday that the economic strength in the first two quarters of the year will push the predicted recession to the latter half of 2023.
Brown says that the economy keeps surprising analysts, and as a result, recession calls keep being delayed quarter-by-quarter.
The signs of growth in the May flash estimate will likely push these forecasts out further, he adds, with his call for a recession now timed to begin no sooner than the fourth quarter of the year — if it happens at all.
“The chance of a recession looks a lot lower than it did nine months ago,” Brown says.
Fewer businesses, consumers expect recession
The Bank of Canada, meanwhile, released another pair of reports on Friday morning that provide insights into sentiments around the economy: the business outlook survey and its survey of consumer expectations.
The Bank of Canada’s business outlook sentiment marker declined for the sixth consecutive quarter, according to the survey. The central bank says the drop suggests an overall decline in business confidence but also signals less inflationary pressure.
Businesses are expecting weaker wage growth in the next 12 months, the first time the survey has shown an expected slowdown here since the start of the pandemic.
Although cost pressures on business owners are showing signs of easing, businesses have not returned to their pre-pandemic price-setting behaviours, the Bank of Canada noted.
“Several firms are still planning to make larger and more frequent price increases in the coming year than they usually would. The continuation of higher-than-normal price growth is tied mainly to lags in the pass-through of previous increases in input prices, which is not yet complete,” the Bank explained.
Despite indications that businesses are largely expecting slower growth and plan less investment in the months ahead, the Bank of Canada surveys also show fewer business owners are expecting a recession to hit the economy.
Roughly a third of all respondents to the business survey said they are planning for a recession, down from half in the previous quarter.
Businesses expect consumer demand will pick up with more certainty in the Bank of Canada’s interest rate path — though it’s key to mention here that the surveys were done in May, before the central bank’s June 7 rate hike.
On the consumer side, households remain concerned about the cost of living — especially those with mortgages set to renew in the months ahead amid the higher interest rate environment.
Half of respondents to the consumer survey still expect a recession in the coming year — that sentiment is down slightly from the previous quarter — while their confidence in the economy’s future overall has improved, the Bank of Canada notes.
“Some households are starting to think the worst is behind them,” the Bank noted in its survey.
Short-term inflation expectations were also lower in the latest surveys, but remain above the Bank of Canada’s two per cent target.
What will the Bank of Canada do next?
The central bank will be parsing the GDP data and the outlook surveys closely for signs of an expected slowdown as it mulls its next interest rate decision on July 12. The Bank of Canada surprised most observers with a 25-basis-point hike earlier this month, with some economists saying one increase won’t be enough to bring inflation back down to two per cent.
Benjamin Reitzes, BMO’s managing director of Canadian rates and macro strategist, said in a note Friday that the business outlook survey showed clear signs of softening in pressures facing business such as labour constraints and supply chain kinks.
Taken together, Reitzes said there “doesn’t appear to be as much urgency to hike rates again in July,” with the final decision likely coming down to the June jobs figures released in a week.
Grantham said in his note that, barring surprises in next week’s June jobs report, CIBC is calling for a rate hold in July followed by a final quarter-percentage-point increase in September.
RBC economist Claire Fan said in a note Friday that signs of progress in the Bank of Canada surveys won’t be enough to put the central bank back on the sidelines, however.
There hasn’t been enough relief in the labour market data and this week’s inflation report for May, while it showed signs of cooling, has not seen price pressures return to pre-pandemic levels, Fan noted. RBC calls for a 25-basis-point hike on in July to bring the policy rate to 5.0 per cent before the Bank of Canada presses pause again for the remainder of 2023.
Brown says the business outlook and consumer surveys are “tricky to interpret” for members of the Bank of Canada’s governing council, and could be used to justify another hike or a pause depending on what data is being considered.
He agrees with Fan that there hasn’t been enough progress on the inflation front, especially among the Bank of Canada’s preferred core inflation figures, to warrant an end to rate hikes. And if the central bank policymakers are wont to raise rates again, he does not expect they will wait to September to do so.
After a busy week of economic releases, however, Brown says the latest data might have given the Bank of Canada more room to pause than first expected.
“My confidence in the view that the Bank will hike in July is certainly lower than it was this time last week,” he says.
MILAN (AP) — Bologna’s preparations for its Champions League debut are not going well though it managed to spoil Como’s first Serie A home match in 21 years on Saturday.
Bologna came from two goals down to salvage a 2-2 draw to gather three points from its opening four matches.
Bologna hosts Shakhtar Donetsk on Wednesday. Its only other appearance in Europe’s top competition was in 1964 in the preliminary round of the old European Cup.
AC Milan is also winless as it prepares for a Tuesday Champions League match against Liverpool. The Rossoneri hosted promoted Venezia later. Juventus drew at Empoli 0-0.
Como made a great start in the fifth minute when Patrick Cutrone attempted to roll the ball across the six-yard box but it took a huge deflection off Bologna defender Nicolò Casale for an own goal.
Bologna thought it was gifted a way back into the match on the stroke of halftime when referee Marco Piccinini signalled for a penalty following an Alberto Moreno handball, but he revoked his decision and instead gave a free kick because the handball was just outside the area.
Bologna improved after the break but found itself further behind when Cutrone raced onto a through ball and cut inside past a defender and fired into the far bottom corner.
Tommaso Pobega hit the post for Bologna, which finally pulled one back in the 76th through substitute Santiago Castro.
Another substitute helped the visitors snatch a point when Samuel Iling-Junior curled a fine strike into the top left corner in stoppage time.
Unbeaten sides
Juventus, and more surprisingly Empoli, are among six unbeaten sides.
Empoli held Monza and Bologna to draws either side of a shock 2-1 win at Roma. Juventus’ perfect start to the season was ruined by Roma in a goalless draw before the international break.
On Saturday, there were few clearcut chances in Empoli although home goalkeeper Devis Vásquez made spectacular saves to fingertip out a Federico Gatti header and deny Dusan Vlahovic in a one on one with the Juventus forward.
Empoli had a good opportunity in the 73rd minute following an Alberto Grassi one-two with Pietro Pellegri but the finish was straight at Mattia Perin.
The host could have won it right at the death but Gatti flew in with a great sliding block to keep out Emanuel Gyasi’s close-range effort.
Juventus hosts PSV Eindhoven in the Champions League on Tuesday.
MANCHESTER, England (AP) — Not good enough. That was Arne Slot’s verdict after his first defeat as Liverpool manager on Saturday.
A shock 1-0 loss at home to Nottingham Forest in the English Premier League ended Slot’s perfect record since succeeding Jurgen Klopp at Anfield at the end of last season.
“We had a lot of ball possession but only managed to create three (or) four quite good chances, so that is by far not enough if you have so much ball possession,” said the Dutchman, who suggested his team should not be losing to the likes of Forest.
“If you lose a home game it’s always a setback, especially if you face a team … we never know, maybe they will go all the way to fight for Champions League tickets, but normally this team is not ending up in the top 10, so if you lose a game against them that’s a big disappointment.”
Slot won his first three games in charge, including a memorable 3-0 victory against Manchester United before the international break.
But that run came to an end after Callum Hudson-Odoi struck in the 72nd with a curling effort from the edge of the box and beyond goalkeeper Alisson.
Liverpool’s defeat leaves Manchester City as the only team with a 100% record in the league after a 2-1 win against Brentford kept the defending champion at the top of the table.
United won at Southampton 3-0 to end its two-game losing streak.
Unstoppable Haaland
Erling Haaland moved to 99 goals for City after scoring twice against Brentford.
The Norwegian’s double came after Yoane Wissa fired Brentford ahead with just 22 seconds on the clock.
Haaland scored his 98th and 99th goals in his 103rd City appearance in all competitions. And he was the width of the post away from his third consecutive hat trick after trebles against Ipswich and West Ham.
“He’s been really, really good. Yeah, I would say he’s the best (he’s been), but it’s only four fixtures (this season),” City manager Pep Guardiola said.
Haaland, who has been nominated for the Ballon d’Or, has nine goals in four league games. He has topped the league scoring charts in each of his two seasons at City since joining from Borussia Dortmund in 2022 for $63 million.
Haaland’s first goal after 19 minutes evened the game following Wissa’s opener, which stunned the Etihad Stadium crowd. Haaland turned and swept a shot past goalkeeper Mark Flekken after a slight deflection off Ethan Pinnock.
He was then too strong for Pinnock when shaking off the defender and running through for his second in the 32nd.
He was inches away in the 81st; the shot came back off the post after beating the keeper.
Rashford snaps run
Marcus Rashford snapped a 12-game barren run in front of goal as United beat Southampton.
Rashford doubled United’s lead at Saint Mary’s after Matthijs de Ligt’s scored his first for the club. Substitute Alejandro Garnacho scored a third in the sixth minute of stoppage time.
The win came after back-to-back defeats for United.
Rashford hadn’t scored since March in United’s win over Liverpool in the FA Cup quarterfinals. He curled in a shot from the edge of the area to put Erik ten Hag’s team 2-0 up at Southampton in the 41st minute.
Ten Hag said it could be a turning point for the forward.
“For every striker, they want to be on the scoring list. Once the first is in, more is coming. Like a ketchup bottle, once it’s going, it’s coming more,” he said.
De Ligt, who joined United from Bayern Munich in the offseason, headed in from Bruno Fernandes’ cross in the 35th.
It could have been a different story if Cameron Archer converted a penalty for Southampton in the 33rd. Instead, his effort was saved by goalkeeper Andre Onana.
Newly promoted Southampton was reduced to 10 men when Jack Stephens was sent off in the 79th for a high challenge on Garnacho.
Villa comeback
After three straight defeats to start the league, Everton looked set for its first win when leading Aston Villa 2-0.
Goals from Dwight McNeil and Dominic Calvert-Lewin put Sean Dyche’s team in control until Ollie Watkins struck twice to even the game.
Jhon Duran completed Villa’s comeback and sealed a 3-2 win in the 76th to leave Everton rooted to the bottom of the table and the only top flight team without a point.
Late drama
Jean-Philippe Mateta converted a stoppage time penalty to salvage a 2-2 draw for Crystal Palace against Leicester.
Leicester led 2-0 at Selhurst Park after goals from Jamie Vardy and Stephy Mavididi.
But Mateta sparked Palace’s response with a goal in the 47th, a minute after Mavididi doubled Leicester’s advantage.
Conor Coady fouled Ismaili Sarr in the box right near fulltime and Mateta was cool enough to convert.
West Ham left it even later to salvage a point in a 1-1 draw at Fulham.
Danny Ings struck in the fifth minute of added time after Raul Jimenez’s goal looked like earning Fulham the win.
Brighton boss Fabian Hurzeler, the manager of the month for August, was frustrated as his team was held to 0-0 at home by Ipswich.
CLEVELAND (AP) — Restricted free agent forward Isaac Okoro has agreed to re-sign with the Cleveland Cavaliers on a three-year contract, a person familiar with the negotiations told The Associated Press on Saturday.
Okoro’s new deal is worth $38 million, according to the person who spoke to the AP on condition of anonymity because the contract has not been signed or announced by the team.
ESPN.com first reported the agreement, citing Okoro’s representation.
The fifth overall pick in the 2020 NBA draft, Okoro is Cleveland’s best perimeter defender, often drawing the assignment of guarding the opponent’s top scorer. Okoro also has worked to improve his offensive game.
The 23-year-old averaged 9.4 points and 3.0 rebounds in 69 games — 42 starts — last season for the Cavs, who beat Orlando in the opening round of the playoffs before losing to eventual champion Boston.
Okoro shot a career-best 39% on 3-pointers, forcing teams to come out and guard him.
His agreement caps an extraordinarily busy summer for the Cavs that began with coach J.B. Bickerstaff being fired and replaced by Kenny Atkinson. All-Star guard Donovan Mitchell signed a three-year, $150 million extension in July, ending months of speculation that he wanted out of Cleveland.
Also, power forward Evan Mobley signed a five-year, $224 deal and center Jarrett Allen signed a three-year, $91 million extension.
