Nathan Janzen, senior economist at the Royal Bank of Canada, points out that the Canadian GDP increased 0.4% in Q1, while the details were firmer and a 0.5% surge in March GDP bodes well for a return to stronger growth rates in Q2.
Key Quotes
“Q1 growth was widely expected to come in on the soft side. The 0.4% increase was a touch below market expectations and more in line with the Bank of Canada’s last call for a 0.3% gain. More importantly, much of the softness in Q1 can still be traced to disruptions to oil & gas activity in the wake of lower prices last year and mandated production cuts in Alberta.”
“A 0.5% surge in GDP on a monthly basis in March is right in line with calls for a pickup in growth in Q2 – leaving if anything some near-term upside risk to our own call for a 2.2% increase. And the composition of Q1 GDP growth on an expenditure basis was generally better than feared.”
“Net trade was, as expected, the main drag on growth in Q1 with lower oil production weighing on exports.”
“The current economic backdrop still looks okay, and better than quarterly GDP growth headlines in the last couple of quarters would imply, but there is still plenty uncertainty about the outlook to keep the BoC on the sidelines in terms of any future interest rate hikes for now.”
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