Canada’s economy fell short of forecasts last quarter, as exports slumped amid continued supply constraints.
Latest data from Statistics Canada shows that GDP output grew by only 3.1% in the first quarter, substantially below forecasts calling for a 5.2% increase, and even weaker than the statistics agency’s preliminary data. In fact, the 0.8% quarterly increase did little to reach the 6.6% annualized gain reported in the first three months of 2021.
The drop in output was primarily due to a decline in export volumes which fell 2.4% from the final three months of 2021, marking an annualized decline of 9.4%. A number of setbacks in the trade of energy products contributed to the slump, with both exports and imports falling by 2.4% and 0.7%, respectively.
On the other hand, though, domestic demand grew 4.8% from the same quarter a year ago, up from the 3.7% increase reported in the fourth quarter of last year. Contributing to the gain was a strong rebound in housing investment and household consumption, with employee compensation rising 3.8%— the second largest quarterly gain since 1981.
Although last quarter’s economic expansion fell short of expectations, policy makers at the Bank of Canada are likely not going to divert their hawkish path towards higher interest rates. Markets are pricing in a 50 basis point increase come Wednesday, bringing borrowing costs to 1.5%.
Information for this briefing was found via Statistics Canada. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.