The Canadian economy showed more signs of weakness in terms of its Canada GDP growth rate. It stated how it should keep the Bank of Canada cutting interest rates to boost growth. The preliminary data suggest gross domestic product was flat in August. This is because it declines in manufacturing and transportation offset gains in oil and gas extraction and the public sector. This was stated by Statistics Canada reported Friday in Ottawa.
This would be the third month of zero growth in six months. Even though it followed a 0.2% expansion in July, which beat a median estimate of 0.1% increase in a Bloomberg survey of economists. Overall, the data point to the economy expanding at a 1% annualized pace in the third quarter. This was below the economist estimates of 1.5% and the central bank’s forecast of 2.8%. Also, after Friday’s report, markets raised the odds of a half-percentage point. This has cut to slightly higher than a coin flip of the Canada GDP growth rate.
Canada GDP Growth Rate: Bank of Canada Actions
The Bank of Canada policymakers with regard to Canada GDP growth rate are increasingly focusing on preserving economic growth. This was after inflation hit the 2% target in August. Governor Tiff Macklem has explicitly said the central bank wants the Canada GDP growth rate of the economy to grow faster than 2%.
“Today’s release continues to show that Canadian growth remains sluggish and that the amount of slack in the economy continues to rise,” Charles St-Arnaud, chief economist at Alberta Central, said in an email. St-Arnaud now expects the Bank of Canada to cut by half a percentage point at its next meeting.
Officials have already cut rates by 25 basis points for three straight meetings to bring the overnight rate to 4.25%. Plus, they have signaled more cuts to come.
Earlier this month, Macklem repeated that officials may cut rates by 50 basis points or more in one decision. Thhis is if inflation and economic growth decelerate by more than expected. However, he also said they could decide to slow the pace of cuts if growth is stronger or inflation is persistent.
“Canadian GDP growth rate is tracking below potential and even below the modest pace of the past year,” Doug Porter, chief economist at the Bank of Montreal, said in a report to investors. “Governor Macklem has stated that the Bank wants growth to pick up, and the trend does not seem to be cooperating, clearly raising the odds of more aggressive hikes.”
Next Steps of Bank of Canada
The Bank of Canada next sets rates on October 23. Along with it, there are still key inflation and employment reports to come before that decision. In July, services industries grew 0.2%. This was done with retail, finance, and the public sector leading the gains. Plus, the utilities and manufacturing drove increases in goods-producing industries, which expanded 0.1%.The construction sector contracted 0.4%. This was the second straight monthly decline, and was the largest detractor to growth in July.
Canada GDP growth rate: What was Noticed in July 2024?
The Canadian economy in terms of the Canada GDP growth rate, grew more than expected in July. However, the strength was short-lived as the momentum seems to have failed to carry over into August. To this, Statistics Canada said on Friday that the real gross domestic product grew upto 0.2 percent in July. This was after no following change in June was helped by strength in the retail trade sector.
However, the agency said its early estimate for August suggests real Canada GDP growth rate for the month was essentially unchanged. This was because strength in oil and gas extraction and the public sector were offset. This was by weakness in manufacturing and transportation and warehousing.
Along with it, the TD Bank economist Marc Ercolao said more interest rate cuts are certainly on the table at the Bank of Canada’s next rate decision in late October.
“For what it’s worth, we don’t think today’s data tips the scales any more-or-less in favour of a potential 50 basis point interest rate cut, which would follow the recent move from the Federal Reserve,” Ercolao wrote in a report.