Canada’s Economic Performance Beats Expectations
Canada’s economy demonstrated resilience by avoiding a recession, with its gross domestic product (GDP) slightly rising in the fourth quarter of last year. This positive shift was largely driven by an increase in crude oil exports and a decrease in imports. This upward trend suggests that the Bank of Canada might maintain its current interest rate stance in its upcoming announcement on March 6. The annualized GDP growth rate for the quarter ending December 31 was 1%, surpassing the expected 0.8%, and marking a rebound from a 0.5% decline in the previous quarter.
Mixed Signals in Economic Indicators
While the overall GDP growth brings a positive outlook, not all economic indicators were as favorable. Final domestic demand fell by 0.2% in the fourth quarter, indicating a slight reduction in expenditures on final consumption and gross fixed-capital formation. This contraction reflects ongoing challenges within the domestic market, where high interest rates continue to suppress economic vitality. Economists like Andrew Grantham from CIBC Capital Markets suggest that the growth was more a result of easing supply constraints boosting exports and car sales, rather than a robust improvement in domestic demand.
Forward-Looking Economic Projections
Looking ahead, economists anticipate potential shifts in monetary policy with predictions of an interest rate cut by June. Despite the growth in GDP, the per capita output continued to decline for the sixth consecutive time due to rapid population growth. The fourth quarter saw a mixed bag of economic activities with a slight increase in household spending and a continued downturn in housing investments. The Royal Bank of Canada’s economist, Nathan Janzen, noted that the increase in GDP was too modest to offset the ongoing decline in output on a per capita basis, highlighting the complex dynamics at play as Canada navigates through economic recovery and challenges.