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Canada Economic Forecast

Canada Economic Outlook

After flatlining in Q4, the economy appeared to perform well in Q1. GDP rose 0.5% month on month in January, topping market expectations, thanks to expansions in mining, construction, manufacturing and services. A flash estimate put the GDP expansion at 0.3% in February thanks to the mining, manufacturing and finance sectors. Moreover, job gains were three times higher than forecast in March, boding well for consumer spending. However, the rate-sensitive real estate sector was downbeat, with housing starts and prices falling in Q1 from Q4. In politics, the federal government published an expansionary budget in March: Over the next five years the country is expected to run a budget deficit and there will be new spending worth CAD 67 billion (USD 91 billion) on areas such as health and dental care, clean energy and cost-of-living measures. This will boost activity ahead.

Canada Inflation

Inflation dropped to 4.3% in March from February’s 5.2%, representing the lowest rate since August 2021 and in line with market expectations. Inflation should move back within the Central Bank’s 1.0–3.0% target range in H2, supported by improved global supply chains and a more favorable base effect, but is not expected to return to the central 2.0% target until late-2024.

This chart displays Economic Growth (GDP, annual variation in %) for Canada from 2013 to 2022.

Canada Economic Data

2017 2018 2019 2020 2021
Population (million) 36.5 37.0 37.5 38.0 38.2
GDP (USD bn) 1,649 1,725 1,743 1,648 2,002
GDP per capita (USD) 45,182 46,612 46,441 43,385 52,390
GDP (CAD bn) 2,141 2,236 2,314 2,210 2,510
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 3.8 1.9 -0.9 11.9
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 6.7 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) 90.9 90.8 90.2 118.9 115.1
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) 1.25 1.37 1.30 1.27 1.26
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) -18.9 -16.8 -14.2 -30.0 3.7
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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