Canada's economic growth misses forecasts, backing interest rate pause
The Canadian economy rebounded slightly last month but still saw little growth, backing a case for the central bank to keep rates on hold despite inflation remaining elevated.
Preliminary data suggest gross domestic product edged up 0.1 per cent in August, Statistics Canada reported Sept. 29 in Ottawa, as declines in the retail and oil and gas industries partly offset increases in the wholesale and finance sectors.
That followed a flat GDP reading in July, which missed expectations for a 0.1 per cent increase in a Bloomberg survey.
Bonds rallied after the numbers were released, driving the Canada two-year benchmark yield to 4.876 per cent, down more than 4 basis points, the lowest intraday level since Sept. 19.
The economy is now on track to expand at a 0.2 per cent annualized rate in the third quarter, if September output is flat. That’s weaker than the 0.4 per cent consensus estimate in a Bloomberg survey.
Although that means Canada could escape a technical recession with this rebound after a second-quarter contraction, the pace of growth is far weaker than the 2.6 per cent seen during the first three months of this year.
The report points to an economy that’s still in a soft patch as interest-rate increases weigh on indebted households and restrain spending. It leaves room for the Bank of Canada to hold short-term borrowing costs steady in late October, despite a worsening inflation backdrop.
The consumer price index rose four per cent in August, the second straight month of acceleration and double the central bank’s target, with core inflation still elevated.
Governor Tiff Macklem and his officials were counting on softer consumer activity to translate into slower price increases in the coming months. They stepped to
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