Canada’s
gross home product
seemingly rebounded barely in March after contracting greater than anticipated in February, main some economists to sign that first-quarter progress will fall in need of the Financial institution of Canada’s estimate and be adopted by a no-growth second quarter or worse.
A flash estimate for March launched by
on Wednesday mentioned the financial system grew 0.1 per cent month over month, however progress contracted 0.2 per cent in February in contrast with economists’ estimate for no change.
The company mentioned poor climate in February contributed to a few of the pullback in February, however economists mentioned Canada’s financial system has been slowing since posting month-to-month progress of 0.4 per cent in January.
Right here’s what they suppose the numbers imply for the financial system, the
Financial institution of Canada
and rates of interest.
‘Beginning to wane’: TD
“The financial momentum that carried into the early phases of 2025 is beginning to wane,” Marc Ercolao, an economist at TD Economics, mentioned in a be aware, including that TD is at present forecasting first-quarter annualized GDP progress of 1.5 per cent.
“Previous this, the outlook is turbulent, with clear draw back dangers to Canada’s financial system because the direct impression from tariffs provides to the headwinds from plunging sentiment,” he mentioned, referring to Financial institution of Canada surveys that point out enterprise and client views of the financial system have dimmed.
Future rate of interest selections by the
Financial institution of Canada
might be no simple matter, he mentioned. Policymakers in April determined to carry
rates of interest
at 2.75 per cent though their outlook for the financial system was downbeat.
“With Canada’s housing market visibly strained, and a few rollover in labour markets and client spending, we’d count on the (Financial institution of Canada) to chop its coverage price by 25 foundation factors at their subsequent assembly in June,” Ercolao mentioned.
‘Sharp’ slowdown: Capital Economics
“There have been solely tentative indicators of a rebound in March,” Stephen Brown, deputy chief North America economist at Capital Economics Ltd., mentioned in a be aware, including that no matter beneficial properties have been achieved from improved climate in March have been offset by the beginning of United States tariffs, which is able to goal manufacturing.
He’s calling for first-quarter annualized progress of 1.6 per cent, which is beneath the Financial institution of Canada’s estimate.
The second quarter is a distinct story, with Capital Economics forecasting annualized GDP of 0.8 per cent.
“We count on GDP progress to gradual sharply slightly than flip adverse this quarter regardless of the imposition of U.S. tariffs,” he mentioned.
‘Drama begins now’: BMO
The flash estimate for progress in March was “mildly encouraging,” although Statistics Canada “badly overestimated” its flash estimate for February when it predicted no progress, Douglas Porter, chief economist at BMO Economics, mentioned in a be aware.
BMO is estimating first-quarter annualized progress of 1.5 per cent.
“The actual drama now begins, with the tariffs rather more of a problem in Q2,” he mentioned, including that “in a little bit of a warning for what lies forward, manufacturing and wholesale commerce have been weak (in March).”
The financial institution expects second-quarter annualized GDP to contract 2.5 per cent, which Porter mentioned is perhaps “too pessimistic” given the Financial institution of Canada modelled two situations the place second-quarter progress is flat or, in its worst-case choice, shrinks 1.3 per cent.
Nevertheless, with the U.S. financial system retreating 0.3 per cent within the first quarter, based on knowledge launched Wednesday, “we’d be stunned if GDP (in Canada) manages to develop in Q2,” he mentioned.
U.S. ‘spillover’: RBC
A bunch of things damage February’s progress greater than anticipated, together with poor climate, the tip of the GST vacation, volatility within the oil and gasoline sectors and a decline in client and enterprise outlooks as a result of tariff worries, Claire Fan, a senior economist at RBC Economics, mentioned.
She expects first-quarter annualized progress might be 1.5 per cent based mostly on the “partial” GDP rebound in March.
“The rise in March gained’t retrace the entire decline in February, however was nonetheless higher than feared given tariffs and counter tariffs levied at the start and in the midst of that month,” she mentioned in a be aware, including there stay some indicators of “resilience” within the financial system based mostly on final month’s turnaround and RBC’s proprietary bank card data.
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“Trying ahead, we count on direct tariff impression might be comparatively contained, however a weaker U.S. financial system will proceed to spill over and negatively impression Canada,” Fan mentioned.
RBC is asking for flat second-quarter progress and for the unemployment price to rise.
• E mail: gmvsuhanic@postmedia.com
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