(OTTAWA) Canada’s economy surged in February as pandemic-related restrictions eased, fueling economists’ expectations that the Bank of Canada is poised to hike another 50 basis points in its policy rate in June.
Updated yesterday at 5:00 p.m.
Real gross domestic product (GDP) rose 1.1% in February to post its biggest monthly gain since March 2021, Statistics Canada said Friday.
It was the ninth consecutive monthly gain. In addition, this advance was higher than the federal agency’s initial estimate for the month, which instead forecast a 0.8% increase for the month.
Statistics Canada’s preliminary estimate for March’s GDP calls for growth of 0.5%. Official data is expected on May 31.
“With all the talk about 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 unrelenting. wrote TD Bank economist James Orlando in a report.
“The Bank of Canada will not need further convincing that another 50 basis point hike is needed at its meeting on 1er June. »
The central bank raised its key interest rate by half a percentage point for the first time in more than 20 years earlier this month, taking it to 1.0%. She also warned that further rate hikes were to come, to help her in her fight against inflation.
The bank’s governor, Tiff Macklem, told a House of Commons committee this week that in anticipation of its upcoming decisions, the bank ” [envisagerait] to reach a new milestone of 50 basis points”.
Royal Bank economist Claire Fan estimated 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 1.4% annualized contraction in US GDP for the same quarter announced earlier this week,” Ms.me Fan in a report.
“But capacity issues are becoming increasingly pressing for both economies. Labor shortages are exceptionally acute, and this is true even for sectors with close customer contact, which have yet to fully recover. »
According to Statistics Canada, 16 of 20 industrial sectors grew in February, with service-producing industries rising 0.9% while goods-producing industries rose 1.5%.
The accommodation and food services sector rose 15.1% in February as pandemic-related restrictions put in place in December and January were eased.
The transportation and warehousing sector gained 3.1%, while the arts, entertainment and recreation sector rebounded and rose 8.4% for the month. The construction sector, for its part, rose 2.7% in February.