Canada’s economy beats forecasts, easing pressure on Bank of Canada

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“The Canadian economy returned to growth towards the end of 2023, and somewhat more emphatically than anticipated,” CIBC economist Andrew Grantham wrote in a note after the data was released on Jan. 31.

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Statistics Canada said most of that growth came from goods-producing industries, including manufacturing and wholesale trade, which saw their biggest gains since January 2023.

Bank of Montreal chief economist Douglas Porter said since those sectors are heavily influenced by exports, “it seems that the surprising resiliency in the U.S. economy is indeed spilling over into some sectors in Canada.”

Wholesale trade rebounded by 0.7 per cent after two months of declines.

A preliminary estimate of 0.3 per cent growth in December suggests GDP increased 0.3 per cent in the fourth quarter after posting a decline in the third quarter. That would bring economic growth in 2023 to 1.5 per cent, StatCan said.

“Canada had a far firmer growth backdrop to end 2023 than expected, and this points to an upward revision to 2024 estimates,” BMO’s Porter wrote.

If December’s estimate is close to accurate, there’s much more momentum heading into 2024 than was expected, he said. That could also mean less pressure on the Bank of Canada to start cutting interest rates any time soon.

“This solid result, after a long dry spell for growth, affords policymakers the ability to gently push back on easing chatter, as they wait for underlying inflation to come down further,” said Porter.

• Email: dpaglinawan@postmedia.com

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