Economy slows more than expected, raising hopes of Bank of Canada rate cut
The Canadian economy grew at a slower-than-expected pace in the first quarter, amid rising expectations that the Bank of Canada will cut interest rates.
The country’s gross domestic product (GDP), which measures the value of goods and services for a specific time frame, rose by 0.4 per cent in the first three months of 2024, according to Statistics Canada.
On an annualized rate, the economy expanded by 1.7 per cent, weaker than the 2.2 per cent consensus expectation and the Bank of Canada’s forecast of 2.8 per cent.
“The big picture is that Canada’s economy has expanded by a meagre 0.5 per cent in the past year,” Bank of Montreal’s chief economist Douglas Porter said in a note on Friday. “There are respectable arguments on both sides of the decision, but we believe the balance of evidence points to a cut.”
In April, the Bank of Canada announced its sixth consecutive hold on interest rates since the last increase in July 2023. But as the economy slows due to higher borrowing costs and inflation, many economists expect the bank to announce its first cut in either June or July. The central bank’s next meeting is on June 5.
Statistics Canada also downgraded its GDP figure for the fourth quarter of 2023 to flat from 0.2 per cent.
Measured against Canada’s growing population, the country’s per-capita GDP declined for the sixth quarter of the past seven, said Royal Bank of Canada’s assistant chief economist Nathan Jenzen.
Household spending increased by 0.7 per cent in the first quarter, primarily due to a 1.1 per cent rise in spending on telecommunications services, rent and air transport, Statistics Canada said.
Lower spending by non-residents in Canada also contributed to the increase in overall household expenditures. On a
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