Canada's economy has started 2024 on a remarkably strong note. Data released today by Statistics Canada show that real GDP grew 0.6 percent in January, the fastest monthly reading since January 2023. The December GDP data, originally reported as flat, were revised to a 0.1 percent decline, largely reflecting the impact of public sector strikes in Quebec, and January's strength partly reflects the end of those strikes. However, that was not the only important factor; growth in January was very broad-based, with eighteen of the twenty sub-sectors tracked by StatsCan recording higher output.
Evidence that the strong report for January is not just a rebound effect is provided by the preliminary estimate for GDP growth for February. StatsCan estimates that real GDP grew a further 0.4 percent in the month, and once again the expansion appears to have been broad-based, with gains in extraction industries, manufacturing and finance.
In short, although the economy only barely avoided a technical recession in the second half of 2023, prospects for the current year appear to be rather brighter than either both policymakers and business economists had been predicting. The Federal budget is set for April 16, and it will be interesting to see whether Finance Minister Freeland's fiscal projections are amended at all in light of the rise in revenues that faster GDP growth is likely to produce. The stronger GDP data are also welcome news in the context of the falling per capita GDP that has resulted from high immigration rates. Lastly, today's data arguably give the Bank of Canada more time to decide on when to start cutting interest rates, but a first move in June still seems the likeliest outcome.
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