Canada’s economy started the year strong, but things are changing fast. Statistics Canada (Stat Can) real gross domestic (GDP) growth came in slower-than-expected in February. Today’s data also included a downward revision for January, and a preliminary estimate of flat growth for the rest of the quarter. Any signs of life the economy showed at the start of the year now appear to be just noise.
Canada’s Economy Grew Half The Rate of Preliminary Estimates
Canadian economic output came in much lower than preliminary data implied. Real GDP grew 0.2% in February, 0.1 points below expectations and half of Stat Can’s 0.4% preliminary estimate for the month.
Canadian GDP Growth Is Hitting A Wall
Canadian real GDP in chained 2017 dollars.
Source: Statistics Canada.
Just 12 of the 20 sectors tracked showed gains, with the remaining 8 contracting in the month. In addition, 7 sectors remain weaker than last year, emphasizing that January’s growth surprise may have led experts to assume the economy was stronger than reality.
Strong January Data Gets A Downward Revision
Speaking of January’s surprise growth, Stat Can made a downward revision to the month. Growth was revised 0.1 points lower to 0.5% in January, boosted temporarily by the end of the public strike in the month. This month’s data and revisions further reinforce the temporary nature of last month’s boost.
Canadian GDP Growth Is Even Slower Than The BoC Forecast
Looking forward, the agency doesn’t see real GDP growth being quite as resilient. Preliminary estimates for growth are flat for March, with potential gains made in utilities and real estate offset by drops in manufacturing and retail. If the official numbers match when released next month, the first quarter will show real growth of 0.6%, and annualized growth of 2.5%. That’s 0.3 points lower than the Bank of Canada (BoC) most recently forecast.
The year started with the perception that Canada might not be left behind the global growth rally. Despite the BoC potentially overestimating how fast the economy is moving, they may be right that Canada won’t be joining the global upward revisions they recently forecast.
