MNI: Canada Flash Q1 GDP Gains 2.5% Though Stalled In March

Canada's gross domestic product grew at a 2.5% annualized first-quarter pace according to a flash reading, close to the central bank's recent upgraded estimate and in line with the idea the economy is running at about potential after being in overheated territory.

Statistics Canada's estimate is based on an advance estimate the quarter ended with GDP coming in flat in March, with the agency saying gains in utilities and real
estate were curbed by decreases in manufacturing and retail.

The official estimate showed the economy grew 0.2% in February, lagging economist forecasts for a 0.3% gain as increases in natural resources and transportation were pared by manufacturing and utilities. Cold winter weather led to some volatility across some of those industries in the last two months. 

The Bank of Canada has estimated that GDP based on the full national accounts data coming May 31 will be 2.8% and has said the economy has opened up a modest amount of slack following its 10 rate hikes to 5%, the highest since 2001. Governor Tiff Macklem has said the timing of a rate cut depends mostly on seeing evidence that trend inflation is settling back at his 2% target and it's possible he could do so at the next meeting in June. 

Even with the slight miss on growth Canada's GDP may end up pulling off a surprising beat against U.S. growth in the first quarter. Not so long ago many Canadian economist had predicted the economy would stall or shrink in the early part of this year. At the same time, there are signs of economic slack with unemployment rising by about a percentage point in recent months and headline inflation sticking below 3% for the first time since the pandemic rebound.

February's GDP report showed growth across 12 of 20 major industries. The figures were also distorted by the after effects of a major public sector strike in Quebec. Future growth could also be slowed as families renew mortgages at much higher rates or by slower population growth as the government curbs record immigration.