Canadian economy grows more than expected
The Canadian economy surprised to the upside as it posted its strongest monthly growth in a year, which may keep the Bank of Canada “on its toes,” some economists say, as the first interest rate cut looms.
Real gross domestic product (GDP), which measures the value of goods and services produced during a specific time frame, edged up by 0.6 per cent in January, according to Statistics Canada, beating analysts' expectations of 0.4 per cent. The agency also expects a 0.4 per cent rise in GDP during February.
“To put that two-month flurry of growth into perspective, the combined one per cent gain is as much as the economy grew in the entire 12 months of 2023,” Bank of Montreal economist Douglas Porter said in a note. “After a prolonged lull through much of last year … the economy looks to have caught some strong tailwinds early this year.”
The rise in GDP was due to broad-based growth in 18 of the 20 sectors measured by Statistics Canada.
The public sector, which includes education, health care and social assistance and public administration increased 1.9 per cent in January following two consecutive monthly declines. Education, which grew by six per cent, was the largest contributor to the country's growth as activity rebounded from public-sector-worker strikes in Quebec late last year.
Manufacturing fully recouped December's decline in growth with a 0.9 per cent rise in January. A sudden drop in temperature in mid-january in parts of Canada contributed to increased activity in the utilities sector, which rose by 3.2 per cent, its highest growth rate since January 2022.
The real estate and rental sector grew for third consecutive month — by 0.4 per cent. The Greater Toronto Area, Hamilton-burlington and most markets in Ontario's Greater Golden Horseshoe contributed to the growth.
These “robust” figures could pose a difficult challenge for the Bank of Canada, Toronto-dominion Bank economist Marc Ercolao said in a note.
While the central bank has received “solid evidence” in the past two months that inflation is co-operating, these “strong GDP data prints” will “keep them on their toes,” he said.