Canada’s economy has lengthened its series of monthly gains, with preliminary data showing that the expansion exceeded expectations for the first quarter, cementing the Bank of Canada’s aggressive path to raising interest rates.
Gross domestic product rose for the 10th time in a row in March, up 0.5 percent, Statistics Canada reported on Friday. In February, the economy grew faster than expected by 1.1%, the agency said.
Preliminary data suggest growth of about 5.6% for the first quarter on an annual basis, which would exceed most forecasts.
The report illustrates the surprising resilience of the Canadian economy despite restrictions on COVID-19 designed to curb the spread of the omicron variant and a speedy recovery after authorities eased the blockade in February and March.
The economy is about to grow by almost doubling the latest Bank of Canada forecasts for the first quarter, which it forecasts from 3% on an annual basis just two weeks ago. Central bank officials estimate that the country was already at full capacity at the end of last year, after the economy grew by a strong 6.7% year on year in the fourth quarter.
Friday’s report will fuel expectations of a more aggressive rise in Bank of Canada interest rates in the coming months. The Canadian dollar changed slightly, maintaining gains of 0.5% during the day to $ 1,274 per US dollar at 8:45 a.m. in Toronto.
Investors in overnight swaps fully priced with an increase of 50 basis points in the next policy decision on June 1, followed by a series of additional increases that will bring the base interest rate to 3% by the end of this period. year. Since the beginning of March, the Bank of Canada has raised overnight interest rates to 1% from the extremely low of 0.25% found when COVID-19 hit North America.
“The Bank of Canada set the table for a 50-point increase in June, but data like this will have at least some chance that central bankers need to move more aggressively,” said Royce Mendes, head of macro strategy at Desjardins Securities Inc. ., says a report to investors.
The figures also confirm expectations that Canada’s enlargement will outpace growth in many advanced economies this year, in part because the country will not be adversely affected by the crisis in Ukraine thanks to the country’s raw materials sector. The US economy contracted in the first quarter, according to preliminary estimates by the Department of Commerce on Thursday.
In Canada, profits in February were the fastest since March 2021, also a month after the blockade. Increased activity was widespread, with the services sector growing by 0.9% and commodity producers by 1.5%. Of the 20 sectors tracked by Statistics Canada, 16 increased. Accommodation and food rose 15 percent after authorities lifted restrictions.
In its preliminary assessment for March, the agency said customer-oriented industries are growing and manufacturing and construction are also expanding.
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