Canada’s economy grew at an annualized rate of 6.7% in the fourth quarter of last year despite renewed COVID-19 lockdown measures.
The fourth quarter gross domestic product (GDP) expansion followed growth of 5.5% in the third quarter, bringing Canada’s economic output back to pre-pandemic levels. Economists had forecast 6.5% GDP growth in Q4.
For all of 2021, Canada’s GDP expanded 4.6%, the biggest increase in two decades. That’s after the economy shrank the most in more than six decades in 2020.
Preliminary data from Statistics Canada showed a 0.2% monthly gain in January, even after the country was hit by a wave of COVID-19 infections and new lockdown requirements.
Fourth-quarter output was better than the Bank of Canada’s recent estimate of 5.8% annualized growth and reinforces market views that the central bank is about to begin a series of interest rate increases.
The Bank of Canada is expected to raise its benchmark interest rate by a quarter percentage point today (March 2), with markets pricing in a total of seven rate hikes over the next 12 months.
The Canadian dollar reversed losses after the latest GDP figures were released and rose 0.1% to $1.267 per U.S. dollar in Toronto trading.
Businesses led the expansion in the fourth quarter, ramping up inventories and spending more on machinery and equipment.
Non-residential business investment rose by an annualized 8.7%. Inventory accumulation was the biggest contributor of economic growth as supply constraints eased, representing almost two-thirds of the 6.7% annualized gain.