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Canada Economic Forecast

Canada Economic Outlook

GDP expanded 0.1% month on month in October–November, with strong services-sector growth partially offset by contractions in the industrial sector. Moreover, Statistical Office preliminary data suggests that activity was flat in December, putting the quarter-on-quarter expansion for Q4 as a whole at 0.4%. Turning to this year, the economy appears resilient; in January, employment growth far outpaced market expectations and the manufacturing PMI rose back into expansionary territory. Moreover, the Central Bank likely ended its tightening cycle in January, which should support sentiment and limit the hit to demand ahead. However, the housing sector remains in the doldrums due to past interest rate hikes, with housing starts and home sales slumping in January.

Canada Inflation

Inflation fell to 5.9% in January (December: 6.3%), marking the lowest inflation rate since February 2022. Price pressures for transportation eased, which more than offset food prices rising at a quicker pace in January compared to the previous month. Inflation should move back within the Central Bank’s 1.0–3.0% target range in Q4 2023.

Canada Economic Data

2017 2018 2019 2020 2021
Population (million) 36.5 37.0 37.5 38.0 38.2
GDP (USD bn) 1 1 1 1 2
GDP per capita (USD) 45 46 46 43 52
GDP (CAD bn) 2 2 2 2 2
Economic Growth (Nominal GDP, ann. var. %) 5.7 4.4 3.5 -4.5 13.6
Economic Growth (GDP, ann. var. %) 3.0 2.8 1.9 -5.1 5.0
Domestic Demand (ann. var. %) 3.3 2.7 1.3 -3.8 5.8
Private Consumption (ann. var. %) 3.8 2.6 1.5 -6.3 5.1
Government Consumption (ann. var. %) 2.1 3.2 1.0 1.3 6.4
Non-Residential Fixed Investment (ann. var. %) 1.9 3.5 3.2 -11.6 4.3
Fixed Investment (ann. var. %) 3.3 2.5 0.8 -2.4 7.4
Exports (G&S, ann. var. %) 1.4 3.8 2.7 -8.9 1.4
Imports (G&S, ann. var. %) 4.6 3.3 0.4 -9.3 7.8
Industrial Production (ann. var. %) 3.7 3.5 0.1 -8.2 4.5
Retail Sales (ann. var. %) 7.2 3.2 1.4 -1.3 11.8
Home Prices Index (ann. var. %) 11.9 3.7 1.2 6.5 15.0
Disposable Income (ann. var. %) 5.0 3.0 4.5 8.4 4.1
Wages (ann. var. %) 2.0 2.6 2.7 6.8 3.0
Unemployment (% of active population, eop) 6.0 5.7 5.6 8.9 6.0
Unemployment (% of active population, aop) 6.4 5.9 5.7 9.7 7.5
Fiscal Balance (% of GDP) -0.1 0.4 0.0 -10.9 -4.4
Public Debt (% of GDP) 88.9 88.9 87.2 117.8 112.9
Inflation (CPI, ann. var. %, eop) 1.9 2.0 2.2 0.7 4.8
Inflation (CPI, ann. var. %, aop) 1.6 2.3 1.9 0.7 3.4
Inflation (Core, ann. var. %, aop) 1.1 1.5 1.8 1.2 2.8
Inflation (PPI, ann. var. %, aop) 3.1 3.9 -0.1 -0.4 13.9
Target for the Overnight Rate (%, eop) 1.00 1.75 1.75 0.25 0.25
3-Month T-Bill (%, eop) 1.06 1.64 1.66 0.06 0.16
10-Year Bond Yield (%, eop) 2.08 1.98 1.71 0.71 1.49
Exchange Rate (CAD per USD, eop) 1.3 1.4 1.3 1.3 1.3
Exchange Rate (CAD per USD, aop) 1.3 1.3 1.3 1.3 1.3
Current Account Balance (USD bn) -46 -41 -34 -35 -5
Current Account Balance (% of GDP) -2.8 -2.4 -2.0 -2.2 -0.3
Merchandise Trade Balance (USD bn) -19 -17 -14 -30 4
Merchandise Exports (USD bn) 424 452 449 390 507
Merchandise Imports (USD bn) 443 469 463 420 504
Merchandise Exports (ann. var. %) 7.6 6.6 -0.8 -13.2 30.3
Foreign Direct Investment (USD bn) 23 38 50 23 60

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