Canada’s economy grew slightly in August, Statistics Canada reported Friday, and initial estimates suggest growth will continue into September as fears of an impending recession mount.
Real GDP advanced 0.1% in August, the federal agency said, beating its initial estimate made last month, which indicated zero growth for August. In its initial estimate for September, Statistics Canada referred to economic growth identical to that of August, of 0.1%. The preliminary estimate for September tentatively puts the annualized growth rate for the July-September quarter at 1.6%, compared to an annualized pace of 3.3% for the second quarter.
CIBC’s managing director of economics, Karyne Charbonneau, says the economy may have slowed, but it’s encouraging to see that it’s at least shown some growth. “While we will revise our overall growth forecast for 2022 to be a little higher, that does not change our view that the economy will stagnate in the coming months, and the lack of momentum in the end of the third quarter is consistent with this idea, ”wrote Mme Charbonneau in a report.
“With these latest growth numbers only marginally below potential growth estimates, we will need to see the economy slow even further to bring inflation back on target. This confirms the idea that, although we are getting closer to the end of the up cycle, there is still some work to be done. »
The Bank of Canada this week raised its key interest rate by half a percentage point to 3.75%, noting that the economy was overheating, which means that demand is exceeding the ‘offer. And while the central bank said it was nearing the end of its rate-tightening cycle, its governor, Tiff Macklem, clarified that was not the case yet and that further rate hikes would be forthcoming. required.
A slowing economy
In its latest monetary policy report, the Bank of Canada predicted that growth would reach an annual rate of 1.5% in the third quarter, before slowing to an annual rate of 0.5% for the last three months of the year. ‘year.
TD Bank economist James Orlando said while Friday’s data was encouraging, the overall narrative of a slowing Canadian economy hadn’t changed. “With high inflation and the lagged impact of higher interest rates, we are seeing an impact in the goods sector and we expect to see the same on the services side going forward,” Mr. Orlando in a report.
“The Bank of Canada decided to slow the pace of its rate hikes on Wednesday, as it believes a slowdown in economic growth is ahead. Although it is starting to show in the data, we believe that the Bank of Canada will have to continue to raise its key rate to 4.25%, in order to obtain the sufficient deceleration to bring inflation down. »
In its Friday report, Statistics Canada said growth in service-producing industries was offset by a decline in goods-producing industries.