Canadian economic growth hit its highest level in a year in February, according to Statistics Canada – National
Canada’s economy surged in February as pandemic-related restrictions eased, fueling economists’ expectations that the Bank of Canada will opt for another oversized rate hike in June.
Statistics Canada said Friday that real gross domestic product rose 1.1% in February to post its biggest monthly gain since March 2021.
The result was the ninth consecutive monthly gain and beat the agency’s initial estimate for the month which called for a 0.8% increase for the month.
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The agency’s first estimate for March this year pointed to a 0.5% gain for the month. The official figure is expected on May 31.
“With all the talk of how high inflation and rising interest rates will slow growth, today’s GDP report reinforces the view that the momentum of the Canadian economy is uninterrupted,” TD Bank economist James Orlando wrote in a report.
“The Bank of Canada will need no more convincing that another 50 basis point hike is needed at its June 1 meeting.”
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The central bank raised its key interest rate target by half a percentage point for the first time in more than 20 years earlier this month to 1% and warned that further rate hikes rates are coming as it helps keep inflation in check.
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Governor Tiff Macklem told a House of Commons committee this week that in anticipation of its next moves, the bank “will consider taking another 50 basis point milestone.”
RBC economist Claire Fan said that, based on the February reading and early estimates for March, the economy grew at an annualized rate of around 5.5% in the first quarter.
“This is higher than our current forecast of 3.5% and well above the same-quarter 1.4% annualized contraction for US GDP as reported earlier this week,” Fan wrote in a statement. report.
“But capacity issues are becoming increasingly pressing for both economies. Labor shortages are exceptionally acute, and this is true even for sectors in close contact that have yet to fully recover.
According to Statistics Canada, 16 of 20 industrial sectors rose in February, with service-producing industries rising 0.9% while goods-producing industries rose 1.5%.
The accommodation and food services sector climbed 15.1% in February as pandemic-related restrictions put in place in December and January were eased.
Transportation and warehousing gained 3.1%, while the arts, entertainment and recreation sector gained 8.4% for the month.
The construction sector rose 2.7% in February.
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