Canadian Monthly Real GDP Growth (February 2022)

Canadian real GDP inched up 0.1 per cent in February, following a 0.6 per cent jump in January. Both goods-producing and services-providing sectors of the economy grew 0.1 per cent. Growth was led by the public sector (+0.2 per cent), professional, scientific and technical services (+0.6 per cent), and construction activity (+0.3 per cent). Canadian real GDP is now roughly 3.4 per cent above its pre-pandemic, February 2020 level. Preliminary estimates suggest that output in the Canadian economy declined 0.1 per cent in March, implying an annualized growth rate of 2.5 per cent in the first quarter.

On the heels of unexpectedly high real GDP growth in January, February's low figure, alongside preliminary data indicating a slight contraction in March, appears more consistent with the Bank of Canada's expectations for slowing economic growth in 2023. Growth was softer than expected in the fourth quarter of 2022, supporting the Bank of Canada's 'conditional pause' on further rate hikes, and ignoring January, this slowness appears to be continuing in February and March. Due to the long lag of monetary policy, the effects of last year's tightening are still working their way through the economy, and further slowing in GDP and the labour market is anticipated in the second half of 2023. This slowing of growth is likely good news for inflation, which has been trending close to the bank's 2 per cent target in recent months. The next Bank of Canada rate announcement is on June 7th.