By Ketki Saxena
Investing.com -- Statistics Canada says the Canadian economy remained essentially unchanged in April, following a slight uptick in March - and a 0.4% increase in May.
Despite the below consensus reading, economists believe the data provides sufficient evidence that the Canadian economy remains robust, and raises the case for at least one more rate hike from the Bank of Canada.
The economy is now on track to expand at a 1.4% annualized rate in the second quarter, if June output is flat - outpacing the Bank of Canada's estimates for 1% growth in Q1 2023. Worryingly, rate-sensitive sectors like real estate grew for a sixth straight month, rising 0.5%, the largest growth rate since December 2020.
Here's a roundup of what economists are saying - and their calls for the Bank of Canada's next move.
BMO (TSX:BMO) chief economist Douglas Porter highlights that “The bigger picture is that the Canadian economy is managing to keep its head above water in the face of many challenges". - including "one of the largest strikes in years in April".. “The economy has not yet seen one negative monthly reading so far in 2023, an impressive result given the widespread calls for recession at the start of the year.”
Randall Bartlett, Senior Director of Canadian Economics at Desjardins notes that "Another month of below-consensus real GDP growth should be good news for the Bank of Canada. However, the Bank likely won’t be happy about the sustained output gains in the economy outside of the public sector so far in Q2, particularly in real estate. Combined with the ongoing reluctance of core CPI inflation to trend toward the Bank’s 2% target, we continue to expect the Bank will hike by another 25 basis points at its July meeting."
RBC (TSX:RY) economists Claire Fan and Nathan Janzen note that "GDP continues to track a positive (but slower) growth in Q2 after a surge in Q1 in large part due to exceptionally strong consumer spending growth. Even after 450 basis points of rate hikes since March 2022, consumer spending has yet to materially soften to-date..." We still expect the lagged impact of monetary policy will result in softening activity in the back half of 2023, but odds are still tilted towards an additional 25 basis point hike from the Bank of Canada in July."