Canada’s economy and society three years after the start of pandemic: Stats Can
Canada’s economy is showing signs of a rebound despite several global headwinds ahead, one economist says.
In January, the economy expanded 0.5 per cent on a monthly basis, according to data released by Statistics Canada on Tuesday. The growth followed a relatively weak year-end quarter, giving signs of optimism despite the recent global banking crisis and elevated cost of living, one economist said.
“We are seeing some signs of improvement at least in Canada,” Allison Boxer, senior vice-president and economist at PIMCO, told BNN Bloomberg in an interview on Friday.
She added that the country's inflation picture is also encouraging when compared to other developed markets.
In January, inflation showed signs of easing with a 5.9 per cent rise year-over-year, weaker than economists had anticipated.
“Canada stands out as seeing somewhat more progress back towards central bank target than we’ve seen elsewhere,” Boxer said.
The Bank of Canada put the breaks on interest rate hikes as signs of an economic cooldown prevailed, but this latest GDP read, and the flash estimate for February, are not feeding into that narrative, Jimmy Jean, chief economist and strategist with Desjardins, said to BNN Bloomberg in an interview on Friday.
"We could end up with GDP rising 3.0 per cent in (the first-quarter of this year), which is above potential GDP, so that's not good news in an economy that's been overheating," he said.
Jean noted that market participants who have priced in rate cuts from the Bank of Canada following this period of pause could be miscalculating the situation.
While he believes the BoC will ultimately cut rates by the end of this year, he cautioned that an acceleration in economic activity cannot be ignored.
“The Bank of Canada statement clearly mentions that if the conditions are not showing a sufficient level of restrictions they are ready to hike rates again,” Jean said.
Citi's economists are adamant that this will be the case.
In a note to clients on Friday, the bank's economists said they continue to expect another hike by the BoC in June as the latest string of economic data points to stronger growth than the BoC had projected.
"While January GDP was slightly softer than we had penciled in, our takeaway of implications for the Bank of Canada is the same – growth forecasts to start 2023 should be revised substantially higher in the April monetary policy report (MPR)," the report said.