By Ketki Saxena
Investing.com -- Canada's economy exceeded expectations in Q1 2023, with an annualized growth rate of 3.1%, surpassing both analysts' predictions and the Bank of Canada's projection of 2.3%, according to data from Statistics Canada. The strong economic performance has fueled speculation about the possibility of further interest rate hikes by the central bank.
The growth was primarily driven by favorable international trade and an increase in household spending. However, slower inventory accumulations and a decline in housing investment acted as moderating factors, the agency reported. With the economy on a steady upward trajectory, most economists now anticipate a "soft landing" for Canada and, according to a Bloomberg monthly survey, no longer expect a technical recession to occur in the middle of this year.
On a monthly basis in April, the Canadian economy grew by 0.2%, led by mining, oil and gas, transportation and real estate sectors, as per preliminary data from Statistics Canada. This unexpected growth has raised questions about whether the Bank of Canada has increased interest rates sufficiently.
The bank had previously warned that rates could go higher, and the recent economic data could add pressure on policymakers to consider hiking rates again when they issue their rate decision next week. The Bank of Canada has been cautious so far in its approach to raising rates, with concerns over high household debt levels and ongoing trade negotiations surrounding the North American Free Trade Agreement (NAFTA).