By Ketki Saxena
Investing.com -- Earlier today, Statistics Canada announced that the Canadian economy grew marginally more than expected, with monthly GDP up 0.1% in July compared to expectations for a 0.1% contraction.
Given today’s data, projections for growth this quarter range from 0.7% at Scotiabank (TSX:BNS) to 1.5% at RBC (TSX:RY) - though the consensus remains well below the Bank of Canada’s forecast for 2% quarterly growth.
Canadian Economists, who have been expecting a recession, expect growth to slow further this year before the Canadian economy slips into a recession in early 2023.
Economists at major Canadian financial institutions also expect that today’s data will be unlikely to deter the Bank of Canada from further rate hikes, and reiterated calls for rates at 4% before the year’s end.
James Orlando, CFA, Director & Senior Economist at TD (TSX:TD) notes that “For the Bank of Canada, it needs to see further slowing in the economy in order to ease inflationary pressures…. How long this will last is uncertain, especially given our expectation that the BoC will get rates to 4% by year-end.”
RBC economist Claire Fan also reiterated a call for rates at 4% by year’s end: “We look for the overnight rate to reach 4% by December, and expect GDP growth to slow through the rest of this year before the economy tips into a recession in the first half of 2023.”
Randall Bartlett, Senior Director of Canadian Economics at Desjardins also expects a recession in H1 next year. He notes that “Housing markets are already cooling rapidly and GDP growth—which surged out of pandemic lockdowns—has flattened. We continue to expect a higher unemployment rate for the rest of this year, with the economy tipping into recession in the first half of 2023.”
Derek Holt , Vice President and Head of Capital Markets Economics at Scotiabank, takes a more positive tone regarding today’s data. While acknowledging that the July GDP data is “Not exactly cause for breaking out the party hats, especially in light of forward-looking risks,” he points out that thequarter’s expected growth of "0.7% is stall speed, but at least it’s not a contraction”.
He further notes that the Canadian economy “Continues to outperform much of the rest of the world’s major economies in 2022” and remains 2.3% larger than pre-pandemic levels.