GDP ticks upwards after three flat months
Canada’s economy posted slight growth in November, with gross domestic product (GDP) inching upwards by 0.2% following three consecutive flat months.
New figures released by Statistics Canada showed the economy performed better than analysts had expected for the month, with economists having anticipated GDP growth of 0.1%. For the full fourth quarter, real GDP likely grew at a clip of 0.3%, according to a preliminary estimate.
That would reverse some of the setbacks experienced in Q3, when GDP declined by 1.1%, and bring overall economic growth for the year to 1.5%.
Goods-producing industries such as wholesale trade and manufacturing contributed significantly to the economy’s improved November performance, while the education services sector contracted.
Industrial production ticked upwards by 0.8%, with a 0.9% jump in the national manufacturing output bolstered by recovery in chemical and metal subsectors.
What’s next for the Canadian economy?
The news marks the first time Canada’s economy has grown in six months – but is unlikely to change the Bank of Canada’s thinking on a timeline for possible rate cuts.
The Bank of Canada has left its policy rate unchanged in its first announcement of the year.
— Canadian Mortgage Professional Magazine (@CMPmagazine) January 24, 2024
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Royal Bank of Canada (RBC) economist Claire Fan said in a note that the economy’s faster pace towards the end of the year should be taken “with a grain of salt” as early GDP estimates can often be prone to revision.
Much of the economy’s perceived strength in November, she added, could be attributed to one-off factors including recoveries from strike action and factory shutdowns “that are unlikely to be repeated in the following months.”
Nor is the economy likely to heat up significantly in the opening months of the year, according to Fan. “Overall, we continue to expect pressures from elevated interest rates to curb consumer demand, stalling growth in both output and inflation over the first half of 2024 before the Bank of Canada is expected to cut rates in June,” she wrote.
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