Canada's Economic Growth Slows, Increasing Likelihood of Interest Rate Cut

Canadaís economic growth slowed in February, intensifying pressure on the Bank of Canada to consider reducing interest rates as early as June. According to Statistics Canada, real GDP growth for February was only 0.2%, falling short of both the governmentís earlier prediction of 0.4% and analystsí expectations of 0.3%. This deceleration reflects a broader loss of momentum observed through the quarter, despite a 0.6% growth anticipated for Q1 overall.

The transportation and warehousing sectors saw some gains, particularly in rail and air transportation, which surged following Januaryís harsh weather. Conversely, the manufacturing sector experienced a decline, notably in transportation equipment and chemical products. Resource extraction, however, marked an increase, with significant production boosts in oil, gas, and mining.Economists are eyeing the Bank of Canadaís next meeting on June 5, speculating that it may announce its first rate cut since the rate hikes halted in July 2023. This speculation is supported by a softening labor market and the need to stimulate economic activity amid high interest rates currently dampening growth. The decision will also consider upcoming consumer price index data and the complex economic landscape shaped by robust U.S. data, which could influence the timing and extent of any rate adjustments.