Canada: Q1 to be the weakest quarter in 2018 – Wells Fargo

Despite today’s weaker than expected GDP data from Canada, analysts at Wells Fargo, point out that recent data supports a positive outlook.

Key Quotes:

“Policymakers at the Bank of Canada (BoC) have long anticipated a pivot to business investment and exports as drivers of Canadian growth. However, this shift remained elusive in the first quarter, as real GDP growth slowed to a 1.3 percent annualized pace from 1.7 percent in Q4. To be fair, exports did increase during the period, but imports grew more; the result was a drag of more than a full percentage point on headline growth.”

“After starting 2017 on a tear, Canadian GDP growth slowed in the second half of 2017 and the first quarter of 2018. Deceleration in household spending, declines residential investment and slower export growth contributed to the slight downshift in Q1 GDP growth.”

“Recent economic data support the case for a positive outlook on the Canadian economy, as laid out by the BoC in their most recent policy statement. Higher oil prices and service-sector strength helped lift all provincial economic boats in 2017, putting the country on solid footing from coast to coast.”

“We expect that Q1 will be the weakest quarter for growth in 2018. Nevertheless, we remain wary about risks posed by high levels of household debt, a potential slowdown in residential investment and geopolitical concerns (especially the threat of new tariffs from the United States).”