Canada: Economic activity expands at fastest pace since January 2023 in January
GDP grew 0.6% in month-on-month seasonally adjusted terms in January, which contrasted December’s 0.1% decrease and overshot the preliminary estimate of +0.4%. The figure marked the best reading since January 2023. On an annual basis, monthly GDP rose 0.9% in January, which was below December’s 1.0% expansion.
The month-on-month expansion was driven by strong expansions in utilities, agriculture, manufacturing and services. Within services, education and health services benefited from the resolution of the public sector strikes in Quebec, while manufacturing activity was boosted by the resumption of production at some auto assembly plants following partial shutdowns in the previous months. Utilities activity was aided by cold weather spurring heating demand.
Flash data suggests that real GDP rose 0.4% in monthly terms in February, with growth in mining, quarrying, and oil and gas extraction, manufacturing, and finance and insurance partially offset by lower utilities output. This suggests clear upside risks to our panelists’ forecasts of only mild quarter-on-quarter GDP growth in Q1 as a whole, and forecasts are likely to revised upwards accordingly in the coming weeks.
On the reading and Q1 outlook, TD Economics’ Marc Ercolao said:
“January’s GDP print surprised to the upside against expectations that the economy would advance at a more modest pace. Importantly, if the expected carry forward of growth into February is realized, this would put growth in both months as the strongest since January 2023. With today’s print and next month’s guidance, first-quarter GDP is tracking well above potential growth and significantly higher than the Bank of Canada’s current forecast of 0.5% quarter-on-quarter annualized.”