Canada’s Q4 growth tops forecasts
OTTAWA — The Canadian economy expanded at an annualized rate of 1.0 per cent in the fourth quarter, exceeding expectations, data showed on Thursday, a result that should ease interest rate-cutting pressure on the central bank.
Fourth-quarter gross domestic product (GDP) was higher than the Bank of Canada’s expectation for zero growth and analysts’ median forecast for an expansion of 0.8 per cent growth. January GDP likely gained 0.4 per cent from December, Statistics Canada said in a flash estimate.
“Today’s results, while mixed, would send a signal that there’s no urgency to cut rates,” said Doug Porter, chief economist at BMO Capital Markets. “It’s not as if the economy is sinking ... It’s just very slowly but surely moving ahead.”
The Bank of Canada has kept its key overnight rate at a 22-year high of five per cent for the past four meetings as it strives to root out underlying inflation driven by shelter costs, food prices and wages.
Canada’s economy did better than G7 counterparts Japan and U.K., which slipped into recession at the end of last year.
Month-over-month, real GDP was essentially unchanged in December, missing a 0.2 per cent growth forecast, Statistics Canada said. Quarterly growth was fuelled by a rise in exports as imports declined, Statistics Canada said, adding that a decline in business investment was a moderating factor.
Final domestic demand, composed of expenditures on final consumption and gross fixed capital formation, edged down 0.2 per cent in the fourth quarter and outside of 2020, real GDP in 2023 rose at its slowest pace since 2016, Statistics Canada said.
“Growth appears to have been driven largely by an easing of previous supply constraints ... rather than necessarily an improvement in domestic demand,” said Andrew Grantham, economist with CIBC.
The current GDP data doesn’t change his forecast for a first interest rate cut in June, he said.
The Bank of Canada is expected to keep rates on hold at its next policy announcement on Wednesday.