Canadian economy grows 3.9% in September
New reports showing strong third-quarter growth in Canada’s economy will likely encourage the country’s central bank to continue with its pattern of hiking interest rates in a bid to curb high inflation, one economist says.
Sal Guatieri, director and senior economist at BMO Capital Markets, told BNN Bloomberg that the Statistics Canada figures released Tuesday show “resilience” in Canada’s economy, with a strong labour market, wage growth and sustained spending unlikely to put a dent in inflation without further measures.
“This report could only encourage the Bank of Canada to continue raising interest rates,” Guatieri said.
“It really is just telling the Bank of Canada more work needs to be done on the tightening front.”
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The pair of reports from the federal agency looked at economic growth in September and the third quarter of 2022. It reported that the Canadian economy grew at an annualized rate of 2.9 per cent in the third quarter.
Real domestic product growth outpaced expectations at 0.7 per cent, with exports, non-residential structures and business investment leading the increase and moderating declines in the housing market and household spending.
The numbers come a week before the Bank of Canada is poised to make its last interest rate decision of the year after repeatedly raising its key interest rate to the latest figure of 3.75 per cent.
Guatieri said he’s expecting an increase “probably at a similar pace as the last time” at 50 basis points, or half a percentage point.
Spending trends in the latest Statistics Canada reports may reflect excess savings people have built up during the pandemic, Guatieri said. But he still predicted an economic slowdown in the current quarter and the possibility of a “very mild, shallow recession” in Canada and the U.S. as homeowners respond to higher rates by spending less.
The trend in exports likely will not persist, Guatieri said, as the world faces similar economic pressures to Canada.
“We don’t expect this type of growth to last,” he said.With files from The Canadian Press