Canadian GDP Growth Falls Below Expectations, Raising Economic Concerns

Canada’s economic growth for February fell short of expectations, and the economy is anticipated to contract in March, aligning with the central bank’s decision to keep interest rate hikes on hold. According to Statistics Canada, February’s gross domestic product (GDP) increased by 0.1 percent from January, below the projected 0.2 percent rise by analysts. The preliminary estimate suggests a 0.1 percent decline in March GDP, possibly resulting in a 2.5 percent annualized growth for the first quarter, exceeding the Bank of Canada’s forecast of 2.3 percent.

Chief economist at BMO Capital Markets, Doug Porter, remarked, “The Canadian economy looks to have stumbled in the early spring after a sprinting start to the year.” The ongoing strike, considered the largest in Canadian history and now in its 10th day, is expected to impact this month’s growth, contributing to a weaker start to the second quarter.

Analysts anticipate the Bank of Canada to maintain its current stance, keeping interest rates steady, especially if inflation continues to decline. Despite previously signaling the possibility of further rate hikes, the central bank acknowledged the diminished risk of a recession and emphasized the positive but weak growth forecast for the remaining quarters of the year.

While the goods-producing and service-producing sectors both saw a 0.1 percent expansion in February, gains were observed in public, construction, finance, and insurance sectors, with wholesale and retail trade sectors acting as drags. March’s GDP is likely to be influenced by declines in the retail and wholesale trade sectors.

The Canadian dollar experienced a 0.3 percent decrease, trading at 1.36 to the US dollar, reflecting market concerns following the economic data release. The Bank of Canada, having previously raised interest rates aggressively to curb inflation, maintained its key policy rate at 4.5 percent for the second consecutive month, signaling a cautious approach amid economic uncertainties.

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