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Canadian GDP growth falls short of expectations

Canadian GDP growth falls short of expectations

Canadian GDP growth falls short of expectations in Q4

Source: BNN
Author: Theophilos Argitis

Canada’s economy decelerated more than expected in the second half of last year, amid signs indebted households have begun slowing down spending.

The economy grew at an annualized pace of 1.7 per cent in the fourth quarter, Statistics Canada reported Friday, versus economist expectations for 2 per cent growth. Third-quarter gross domestic product growth was also revised down to 1.5 per cent from an initial estimate of 1.7 per cent.

The data not only show the slowdown is well underway, which was expected, but an economy that isn’t even growing above its so- called potential growth level.

That’s a surprise since most economists were expecting Canadian growth would continue to run slightly above its noninflationary speed limit for at least another year, leading to price pressures that would prompt the Bank of Canada to keep hiking interest rates.

“The main message though is that the exciting growth from the middle of 2016 up until the middle of 2017 is now truly in the past, and the economy is back to the drudgery of slogging out something closer to potential of around 2 per cent. With trade uncertainties mounting and inflation still reasonably well behaved, this gives the Bank of Canada plenty of leeway to stay cautious,” wrote Doug Porter, chief economist at BMO Financial Group in a note to clients.

Randall Bartlett, chief economist at the Institute of Fiscal Studies and Democracy, told BNN current risks like possible U.S. tariffs on steel and aluminum and uncertainty around NAFTA are tilted to the downside for Canada’s economy.

Read the full article here.

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