Canadian Economy Misses Estimates for Q1, Bets Increase for Rate Cut Next Week

The last major economic data point to be released prior to the Bank of Canada’s policy meeting next week was Q1 GDP, which was below expectations. Strong household spending was offset by weak inventory accumulation and most gains were from January’s 0.5 percent jump when the end of public sector strikes in Quebec boosted activity in the education sector. For February, growth slowed to 0.2 percent, while March was flat, leading to a first-quarter expansion of 1.7 percent, below the central bank’s forecast of 2.8 percent but higher than 0.1 percent from the fourth quarter.

The household savings rate reached a 7.0 percent high in the first quarter due to gains in disposable income, which outweighed increases in nominal consumption expenditures.

Looking ahead, April’s initial output is estimated at 0.3 percent due to hours worked in the earlier reported labor market data. Given the continued softening economic backdrop in Canada, the first rate cut from the central bank is expected at next week’s policy meeting.

 

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