- Randall Bartlett
Senior Director of Canadian Economics
Economic News
Canada: Q1 Real GDP Was In like a Lion but Out like a Lamb
April 30, 2024
Highlights
- Real GDP moved modestly higher in February, increasing by 0.2% in the month, following a downwardly revised 0.5% advance in January. This was below the consensus of economic forecasters (0.3%) and Statistics Canada’s flash estimate (0.4%). Growth in services-producing sectors slowed considerably in February (0.2%), following a post-strike-induced bounce in the prior month. Meanwhile, output in goods-producing industries was essentially unchanged. In all, 12 of 20 subsectors posted gains. See Table 1 for further details.
Implications
Even though nearly half of real GDP subsectors declined in February, some of that weakness was temporary, reflecting warmer weather following a cold snap in Western Canada in January. Indeed, that explains the industry leading decline in the utilities sector (-2.6%) that helped to offset the solid rebound in mining and oil and gas extraction (2.5%). Similarly, the 0.4% decline in manufacturing was driven by temporary retooling shutdowns in the auto sector. On the services side, transportation and warehousing (1.4%) led the charge higher, again thanks to a rebound in activity following January’s deep freeze. Other goods- and services-producing sectors made moves closer to more typical levels.
Looking ahead, Statistics Canada’s flash estimate for March real GDP by industry is pointing to a flat print (graph 1). Assuming it’s correct, real GDP by industry would advance by 2.5% annualized in Q1 2024. We’re projecting an advance in Q1 real GDP by expenditure south of that, at 2.2%. This is below the 2.8% in the Bank of Canada’s April 2024 Monetary Policy Report (MPR). Meanwhile, for Q2, we’re tracking real GDP growth in line with the Bank, around 1.5%.
For the Bank of Canada, today’s release kept the real GDP growth tracking for the first half of 2024 close to, and even slightly below, the outlook in the April 2024 MPR. The story so far this year has been similar for inflation. When combined with the ongoing deterioration in real GDP per capita (graph 2) and improving but still soft survey results, we remain of the view that the Bank is on track to begin cutting interest rates at its upcoming June meeting.
