Canada's economic growth slowed down in February, following a strong start to the year, with the economy expanding by 0.2 per cent, as reported by Statistics Canada on Tuesday. This deceleration from January's 0.5 per cent growth has reinforced economists' predictions of potential interest rate cuts by the Bank of Canada in the near future.
RBC economist Claire Fan highlighted that February's GDP report confirmed expectations of a temporary surge in January, rather than signaling a significant turning point for Canada's growth trajectory. Looking forward, Statistics Canada's advance estimate for March suggests a negligible change in real GDP for the month.
The preliminary data indicates that Canada's economy expanded at an annualized rate of 2.5 per cent in the first quarter of 2024. Economists interpret this as a positive sign, suggesting that the January surge was largely influenced by transient factors such as the recovery from Quebec's public sector strike.
Notably, 12 out of 20 sectors exhibited growth in February, primarily driven by a 0.2 per cent increase in services-producing industries. The transportation and warehousing sector saw a notable rise of 1.4 per cent, with rail transportation bouncing back by 5.5 per cent from January's weather-related disruptions in Western Canada. Air transportation also surged by 4.8 per cent, buoyed by expanded international travel capacities to Asia.
Conversely, goods-producing industries remained relatively stagnant, with the mining, quarrying, and oil and gas extraction sector being a standout performer, growing by 2.5 per cent. This growth was propelled by a 3.3 per cent increase in oil and gas extraction, countering the previous month's contraction. However, the utilities sector contracted by 2.6 per cent, while manufacturing saw a modest decline of 0.4 per cent.
The latest economic data underscores the importance of sustained evidence of economic and inflationary response to higher interest rates, a key consideration for the Bank of Canada as it navigates monetary policy decisions in the coming months.
