By Robb M. Stewart
OTTAWA--Canada's economy managed modest but relatively widespread growth in the early months of the year, supporting expectations that the central bank has managed a soft landing following its aggressive rate-raising campaign.
Preliminary data suggest gross domestic product, a broad measure of goods and services produced across the economy, expanded 0.4% last month thanks to strength in areas ranging from mining, and oil and gas, to manufacturing and finance, Statistics Canada said Thursday.
That follows 0.6% growth in January GDP from the month before to 2.218 trillion Canadian dollars, the equivalent of $1.635 trillion, which topped the data agency's advance estimate and the consensus forecast of economists of a 0.4% advance.
Compared with a year earlier, GDP by industry in the first month of the year rose 0.9%.
Canada's economy effectively stalled in the middle of last year as consumer demand and business investment faded under the weight of the central bank's aggressive interest-rate-raising campaign. The Bank of Canada, which is due to update its economic projections when it next decides on monetary policy on April 10, had forecast growth would be close to zero in the first quarter of this year following a slight recovery in the final three months of 2023.
Activity in January was driven by services-producing industries with a rebound in education following the end of public sector strikes in Quebec that had contributed to downwardly-revised 0.1% dip in GDP in December following two months of growth. Canadian manufacturers also saw a recovery in January, as did utilities with a sudden drop in temperatures mid-month that drove a surge in demand in western parts of Canada.
Overall, goods-producing industries were up 0.2% in January, while services-producing industries increased 0.7%.
Statistics Canada's early indications for February suggest activity by utilities faded but only partially offset growth in other areas. The estimate is due to be updated with the release of official GDP data for the month on April 30.
Economists widely expect the Bank of Canada to next month leave its benchmark interest rate at a more than two-decade high of 5% for a sixth straight policy meeting, but could signal it is prepared to begin cutting later this year given the recent deceleration in inflation, loosening of the labor market and weak consumer and business confidence. Bank policymakers are looking for signs that closely watched measures of core inflation are sustainable are headed lower, but remain wary of elevated wage inflation and recent signs the housing market is picking up.
In January, education services contributed the most to growth following strikes in Quebec in November and December, though the data agency notes the start of a strike by some teachers in the province of Saskatchewan tempered some of the industries rebound.
Manufacturing recouped all of the decline seen in December, led by durable goods producers, due largely to an increase in transportation-equipment manufacturing. Motor vehicle manufacturing notched growth after declines four months in a row, as production resumed at some assembly plants following partial shutdowns for retooling.
An uptick in home resale activity helped lift the activity at real estate agents and brokers.
Still, rail transportation was down for a second consecutive month, dented by winter weather in Western Canada that affected train operators.
Oil and gas extraction pulled back after reaching a record high level in December, and mining and quarrying declined after three straight months of growth.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
03-28-24 0856ET
