What happened: GDP grows 0.4% in first quarter and 0.5% in March
Why it matters: The economy appears to be coming back to life but concerns over global trade persist
The Canadian economy kicked off the year in high spirits, although it didn’t quite match expectations of economists.
Data released Friday (May 31) from Statistics Canada reveals gross domestic product grew at an annualized rate of 0.4% in the first three months of 2019.
TD senior economist Brian DePratto described the growth as "modest" and "a bit below the consensus expectation of a 0.7% gain."
But he said in a note to investors that the latest data gives hope that the previous soft patch is now behind the country.
“Don't let the headline fool you, this was a pretty decent GDP report. Final domestic demand finally broke its downtrend, with impressive strength seen in business spending on machinery and equipment — its best quarterly performance since 1996, bringing the level of spending back to pre-crisis levels,” DePratto said.
“It was a good story on the household side too — soft retail sales volumes seem to have been a bit of a red herring, as spending growth ramped up to 3.5%, its best showing in more than a year.”
The data also revealed some negatives for the real estate industry — one of the biggest components in B.C.’s economy.
Residential investment fell 6.1%, new construction declined 13.7% and ownership transfer costs fell 12.2% nationwide.
Statistics Canada also released data for March, revealing the economy expanded 0.5% month to month.
Meanwhile, BMO chief economist Douglas Porter said despite the country waking up from a “two-quarter hibernation of no growth” Canada now faces the prospect of meeting the “icy blast of global trade tensions.”
He cautioned in a note to investors that the economy is at risk of drifting back into a lull for the second half of the year.
“While the economy has been on a nice roll for the past month, and yes it will get a small, temporary boost from the Raptor run, mounting global trade tensions are a huge cloud over the second half of the year’s outlook,” Porter said.
“We are looking for growth to average about 1.7% over the next 18 months, just a pinch below the [Bank of Canada’s] estimate of potential growth — but that was based on the assumption that the trade environment would not deteriorate much further. That assumption is looking increasingly at risk.”
