By Ketki Saxena
Investing.com – Statistics Canada reported March 31 that Canadian GDP grew 0.5% in January, after a 0.1% drop recorded in December. As per StatCan’s“flash estimate,” GDP increased an additional 0.3% in February, on a preliminary basis.
Seventeen of the 20 industries that Statistics Canada monitors posted gains, led by wholesaling, which increased 1.8% cent from December. Mining, quarrying, and oil and gas also helped lead the gains, up 1.1%.
Douglas Porter, chief economist at BMO (TSX:BMO) Capital Markets, noted that today's data shows a "double-barrelled blast of strength is well above even the most optimistic views."
January’s robust growth, plus the preliminary data for February shows GDP tracking at almost 3% for Q1 2023 - well above the 0.5% quarterly growth expected by the Bank of Canada.
"Suffice it to say that if the strength seen in the opening months of the year persists, the [Bank of Canada] is going to find itself in a tough spot," Porter added.
Short-term Government of Canada bond yields rose following the data, as traders repriced Bank of Canada expectations, now expecting that the Canadian central bank leaves interest rates high for longer.
Earlier this month, the Bank of Canada left its key interest rate target unchanged at 4.5%, a “conditional pause” designed to determine the impact that previous interest rate hikes were having on inflation and the economy. In its Summary of Deliberations to explicate the rationale behind the pause, the BoC iterated, however, that the Canadian economy remains in excess demand.
Today’s data provides further evidence to support that assertion, and adds further challenges to the BoC’s fight to cool rising price pressures.