MNI: Canada's GDP Surge Defies Recession Bets

Canada’s GDP continued to defy predictions of a recession with 0.5% growth in January that was the fastest in almost a year and a flash estimate of 0.3% growth in February. 

January's gain included a 1.1% rebound in mining, oil and gas extraction, Statistics Canada said Friday from Ottawa. Service-producing industries rose by 0.6% and goods-producing industries by 0.4%, and there were gains across 17 of 20 sectors. 

Economists see a technical recession early this year and the Bank of Canada says output will be flat in the first three quarters of 2023, though starting from a position of relative strength with unemployment near record lows and wage gains picking up. StatsCan also confirmed Friday that GDP shrank 0.1% in December.

The central bank held its key rate at 4.5% on March 8 and said it will likely pause unless stubborn inflation requires further tightening. That move to the sidelines came before the collapse of SVB and Credit Suisse, adding to downside risk. Inflation reached 8.1% in June, the fastest since January 1983, and has since slowed to 5.2%.

Canada’s economy pulled through last year without any quarter of negative growth, surprising many analysts who saw a potential recession. Output did stall in the fourth quarter, though that was linked to a quirky drop in inventory investment while domestic demand appeared resilient.

Output has now climbed 3% in January from a year ago.

The GDP report is one of the last big ones before the Bank’s April 12 rate decision. Before the mdecision the central bank issues its quarterly business and consumer surveys on April 3 and StatsCan reports February jobs on April 6.