‘Momentum within the Canadian economic system seems to have pale shortly’
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Statistics Canada is predicting gross home product progress can be flat in March after information launched Tuesday confirmed the Canadian economic system slowed greater than anticipated in February.
On a month-over-month foundation, GDP was up simply 0.2 per cent in February, lacking analyst estimates for progress of 0.3 per cent and the information company’s advance estimate of 0.4 per cent. 12 months over 12 months, GDP grew 0.8 per cent, properly off expectations for a 1.1 per cent growth.
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The nationwide information company additionally revised January GDP progress right down to 0.5 per cent from 0.6 per cent.
Right here’s what economists are saying the newest numbers imply for the economic system, the Financial institution of Canada and the trail of rates of interest.
Slowing momentum: CIBC
“Momentum within the Canadian economic system seems to have pale shortly as the primary quarter progressed,” Andrew Grantham, an economist with CIBC Economics, stated in a notice.
Regardless of the slowdown, Grantham estimates that the economic system is on monitor to develop at a 2.5 per cent annualized fee within the first quarter — near the Financial institution of Canada newest estimate of two.8 per cent.
Nonetheless, the end-of-quarter weak point may bleed into the second quarter, Grantham warned, posing dangers for the central financial institution’s estimate of 1.5 per cent annualized progress.
“We at all times suspected that energy firstly of the 12 months largely mirrored an easing of earlier provide constraints and the consequences of better-than-normal winter climate, and that the economic system may stall once more thereafter,” Grantham stated. “In the present day’s information seem to assist that view.”
If the second quarter begins out sluggishly and inflation stays in examine, “the Financial institution of Canada ought to begin steadily lowering rates of interest on the June assembly,” he stated.
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Charge lower in June: Desjardins
“The slowdown in progress isn’t stunning, on condition that January’s enhance was buoyed by one-off elements,” Royce Mendes, managing director and head of macro technique at Desjardins Group, stated in a notice.
Mendes is forecasting first-quarter annualized progress of two.2 per cent and 1.5 per cent within the second quarter, mirroring the Financial institution of Canada’s estimate.
“Because of this, we proceed to see the Financial institution of Canada starting a rate-cutting cycle in June,” he stated.
‘Eerily related’: BMO
“The beginning of 2024 appears to be like eerily just like 2023,” Benjamin Reitzes, macro strategist at BMO Capital Markets, stated in a notice.
In 2023, GDP burst from the beginning gate within the first quarter, solely to fizzle out.
The primary three months of the 12 months look “first rate” to Reitzes, however for him the larger story is “the obvious lack of momentum.”
“That places extra strain on the BoC to start chopping as quickly as June,” he stated, although he cautions that call will in the end rely on the subsequent client value index report due on Could 21.
There was one different complicating issue, Reitzes stated.
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“Sadly, persistently sturdy U.S. information are making issues more and more difficult for the financial institution, as it seems that the Fed (U.S. Federal Reserve) might be on maintain for some time.”
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‘Unlikely to final’ : TD Financial institution
“The deceleration in February and March sign this rebound is unlikely to final,” Mark Ercolao, an economist with Toronto-Dominion Economics, stated in a notice, referring to estimates for annualized progress within the first quarter of two.5 per cent.
“This could encourage the Financial institution of Canada, which wants to ensure inflation is on a sustainable path again to 2 per cent,” Ercolao stated, noting that markets are at present break up between a primary lower in June and July.
TD believes the financial institution will transfer in July, “as it’ll give the financial institution barely extra time to make sure that inflationary developments are sturdy.”
• Electronic mail: gmvsuhanic@postmedia.com
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