MNI: Canadian Economy Grows At The Fastest Pace In A Year
Canada's economy grew at the fastest pace in a year in January with gains across almost every industry and a flash estimate showed further growth in February, continuing a resilient trend that's kept the central bank from reducing the highest borrowing costs in decades.
Gross domestic product grew 0.6% in January, faster than the market consensus of 0.4%, and Statistics Canada's flash estimate showed a 0.4% gain in February. The agency said February's gain also appeared broad-based across natural resources, manufacturing and finance. Those increases lay a foundation for expansion above the Bank of Canada's forecast for first-quarter growth at a 0.5% annualized pace.
Output climbed across 18 of 20 industries in January, broader than the expected boost from the end of a public-sector strike in Quebec. Some of the other strength was also linked to one-off factors such as a 3.2% gain at utilities amid below-average temperatures in western Canada. Auto production grew 4.9% following four straight declines, as some firms re-started assembly lines after retooling work.
Even with the Bank counting on its 10 rate increases to open up slack in the economy retail sales rose a fifth straight month in January and were up 2.2% from a year earlier. Real estate and rental and leasing grew for the third consecutive month, led by the Toronto area. Construction did feel the pinch of higher lending rates, and was down 0.5% on the month and 3.5% from a year ago.
Bank Governor Tiff Macklem held interest rates at the highest since 2001 at 5% earlier this month, saying he doesn’t want to inflict more pain than needed but he must make sure inflation returns consistently to target. The outlook has a few quirks including record immigration that may boost the economy’s potential output while also putting some pressure on already painful housing costs, which has forced the government in recent weeks to restrict new arrivals to the country.
The Bank has said inflation won't return to target until next year and while the last inflation report showed headline prices holding within its 1% to 3% target band core prices remain above that range. Investors predict the first rate cut in June meaning the Bank could signal something at its meeting next month.
Another report Thursday showed payroll employment climbed 0.2% in January and 1.2% from a year ago, while wage gains remained elevated at a 3.9% 12-month pace.