BRITISH COLUMBIA – The Canadian economy rose 0.7 per cent in March, up for the second consecutive month following a 0.9 per cent increase in February. Goods-producing sectors rose 0.9 per cent while services-producing industries were up 0.6 per cent. Canadian real GDP is roughly 1.8 per cent above its pre-pandemic, February 2020 level. Preliminary estimates suggest that output in the Canadian economy grew 0.2 per cent in April.
Growth in the first quarter of 2022 clocked-in at a solid 3.1 per cent at an annualized rate from last quarter. With Omicron lockdowns constraining activity in certain sectors during the start of 2022, performance was mixed across the economy. Construction expanded 3.3 per cent on the continuing residential building boom while manufacturing grew 1.9 per cent due to semiconductor shortages ameliorating. By contrast, Omicron restrictions caused declines in accommodation and food services (-1.2 per cent) and arts, entertainment and recreation (-0.8 per cent).
Growth in the first quarter, though strong, is showing some signs of slowing. That slowdown will likely continue as the Bank of Canada continues its tightening cycle, particularly in interest rate sensitive sectors like housing. The Bank is expected to raise its overnight rate again by 0.5 per cent at tomorrow’s meeting to 1.5 per cent. The expectation is that the bank will continue quarterly rate hikes until the overnight policy rate reaches 2 to 3 per cent, roughly in line with the estimate of the neutral rate of interest.