Canada's economy now 1.2% above pre-pandemic level after nine months of growth
GDP seen up 0.8% in February, 0.2% in January
OTTAWA — The Canadian economy likely gathered momentum in February, growing for a ninth consecutive month after a January gain, data from Statistics Canada showed on Thursday, prompting economists to revise up first quarter projections.
tap here to see other videos from our team.
Canada's economy now 1.2% above pre-pandemic level after nine months of growth Back to video
Real gross domestic product probably grew 0.8 per cent in February, led by increases in manufacturing and resources, Statscan said in a flash estimate. The economy expanded 0.2 per cent in January — matching expectations — despite increased pandemic restrictions.
The robust start to the year sets the stage for first quarter GDP to come in well ahead of the Bank of Canada’s current forecast of 2.0 per cent, said economists.
“Heading into the year, some slowdown in activity was expected due to the pandemic restrictions, but, unlike in past waves, that wasn’t the case,” said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Market Economics, in a note.
“Accordingly, it looks like Q1 GDP growth will clock in at around a 4 per cent annualized rate.”
With February’s gain, Canada’s economy is now 1.2 per cent above pre-pandemic levels, Statscan said. That may add to pressure on the Bank of Canada to move aggressively on rate hikes when it meets in mid-April.
“The Bank may follow through with the recent pledge … that it will be forceful in combating inflation, potentially by hiking interest rates by 50 bp,” said Stephen Brown, senior Canada economist at Capital Economics, in a note.
Inflation has surged to 5.7 per cent and money markets see a 50 per cent chance of a 50-basis point hike, to 1.0 per cent, on April 13.
In January, activity among goods-producing industries jumped, led by a strong rebound in construction and a surge in demand for utilities.
Services were flat as the spread of the Omicron coronavirus variant led to more restrictions, though the February flash estimate suggested a partial reversal for accommodation and food services.
Statistics Canada also revised upwards the December GDP growth rate to 0.1 per cent from flat.
The Canadian dollar was trading 0.3 per cent lower at 1.2517 to the greenback, or 79.89 U.S. cents, as oil fell and the U.S. dollar jumped on waning hopes of progress at Russia-Ukraine peace talks.
© Thomson Reuters 2022
