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Economy records best growth reading since Q2 2022 in the first quarter

GDP expanded 3.1% in seasonally adjusted annualized rate terms (SAAR) in the first quarter, contrasting the 0.1% contraction seen in the fourth quarter of last year and above the 2.5% flash estimate. Q1 marked the best result since Q2 2022.

The upturn reflected improvements in private consumption, fixed investment and exports compared to the previous period. Private consumption growth improved to 5.7% SAAR in the first quarter, which marked the best reading since Q2 2022 (Q4 2022: +1.1% SAAR). Declining price pressures and the strong labor market likely aided spending. Government consumption, meanwhile, dropped 1.5% (Q4 2022: +2.3% SAAR). Fixed investment contracted at a milder rate of 0.9% in Q1, following the 3.9% contraction recorded in the previous quarter. While the decline in residential investment deepened as higher interest rates hit the housing sector, investment in machinery and equipment rebounded.

Exports of goods and services growth accelerated to 10.1% in Q1 (Q4 2022: +2.2% SAAR). In addition, imports of goods and services rebounded, growing 0.9% in Q1 (Q4 2022: -12.6% SAAR).

Flash data points to a 0.2% month-on-month GDP expansion in April, thanks to increases in the energy, transport and real estate sectors.

On the reading, Desjardins’ Randall Bartlett said:

“Q1 real GDP growth outperformed the Bank of Canada and consensus calls, underpinned by broad-based strength in the quarter. Further, the data so far in April suggest the second quarter of 2023 could come close to the 1.0% annualized advance the Bank of Canada projected back in April. […] this is the just the latest data point reinforcing the strength of the Canadian economy, particularly the consumer.”