Canada: Economic activity expands faster than expected in April
The economy expanded 0.3% month-on-month in April, down from March’s 0.5% increase but beating analysts’ expectations of a 0.1% expansion. According to Statistics Canada, 12 out of the 20 industrial sectors posted gains over the previous month, with the mining, quarrying and oil and gas extraction sector leading the pack thanks to an easing of oil production restrictions. On an annual basis, growth ticked up to 1.5% in April from 1.3% in the month prior.
Commenting on April’s print, Brian DePratto, a senior economist at TD Economics, noted:
“The consensus view is for the Federal Reserve to reduce its policy rate in short order, but today’s data highlights that the situation for the Bank of Canada is quite different, underscored by the bid up in the loonie following this report to levels last seen in October. Uncertainty may be elevated, but an upgraded growth forecast is likely to feature in next month’s MPR, leaving another ‘no change’ interest rate decision and a divergence between Canadian and U.S. monetary policy the most likely outcome”.
Growth should pick up notably from Q2 onwards relative to the first quarter of this year, as the energy sector gradually recovers. That being said, growth in 2019 is still expected to come down from 2018. Elevated household debt and debt servicing costs could drag on households’ demand for credit, while a moderating global growth outlook will likely hamper fixed investment.