TORONTO (Reuters) – The Canadian economy recorded no growth in the final three months of 2022, massively underperforming expectations, though economic activity likely rebounded with a 0.3% increase in January, Statistics Canada data showed on Tuesday.
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COMMENTARY
ANDREW GRANTHAM, SENIOR ECONOMIST, CIBC CAPITAL MARKETS
“The Canadian economy surprisingly stalled in the final quarter of 2022, but early indications suggest that it started the new year on a better footing.”
“Even with the January rebound, however, Q4 and Q1 combined seem likely to average slightly below the Bank of Canada’s prior forecasts which supports the current pause in terms of interest rates.”
DEREK HOLT, VICE PRESIDENT OF CAPITAL MARKETS ECONOMICS AT SCOTIABANK
“Generally speaking, I think the underlying details are better than the headline suggests, because so much of the headline, Q4 weakness was driven by very large drags from inventories and imports… I think the way the Bank of Canada would look at it would be more in terms of the final domestic demand definition… You’ve got consumption up 2%, and that added 1.1 percentage points to overall growth. So I think that the Q4 numbers are better under the hood than on the headline, and we have some momentum into Q1 with the three-tenths preliminary guidance for January.”
For the Bank of Canada “March is a done deal. It’ll be a short and sweet statement saying that they’re still on a conditional hold and evaluating the lagging effects. I wouldn’t expect anything out of that one. I think it’ll be a repeat of the messages they’ve delivered so far. But some of the indicators are going in multiple directions and so the Bank of Canada will remain cautious evaluating the data after this meeting… Today there are more positives than negatives on balance. We’ve got incredibly strong job markets, consumption is holding up, the GDP is better in the details and it’s just a very distorted headline. They’ll want to see a whole lot more data before they’re convinced that they’re either done and/or that they’re going to act again.”
ROBERT BOTH, MACRO STRATEGIST, TD SECURITIES
“It is a pretty large miss on Q4. I think that has to give the BoC just a little bit of comfort that higher interest rates are working to slow demand, especially with the conflicting signals from the labour market over the last couple of months. And as far as January was quite strong at 0.3% month-over-month, I think they do have a lot more scope to look past that after a large miss on Q4.”
(Reporting by Fergal Smith, Steve Scherer; Editing by Denny Thomas)
