Canada’s gross domestic product (GDP) rose at a faster-than-expected annualized rate of 5.6%
in this year’s first quarter.
Canada’s economy expanded for a 10th consecutive month in March, increasing 0.5%. In
February, the economy expanded a faster-than-expected 1.1%, Statistics Canada said.
The latest GDP report illustrates the surprising resilience of the Canadian economy despite
COVID-19 restrictions meant to contain the spread of the Omicron variant to start this year, as
well as a quick rebound as authorities eased the lockdowns in March.
Canada’s economy is on track to grow by almost double the Bank of Canada’s latest projections
for the first quarter, which it forecast at an annualized 3% just two weeks ago. Central bank
officials estimate the country was already at full capacity at the end of last year, after the
economy grew at an annualized 6.7% in the fourth quarter.
The report will stoke expectations for more aggressive Bank of Canada interest rate hikes in the
coming months. Investors in overnight swaps are fully pricing in a 50-basis-point increase at the
next policy decision on June 1, followed by a series of additional hikes that will take the
benchmark interest rate as high as 3% by the end of this year.
Since the start of March, the Bank of Canada has raised the overnight rate to 1% from its
emergency low of 0.25% set when COVID-19 hit North America in 2020.
February’s gain was the fastest in Canada since March 2021. The increased activity was
widespread, with services-related sectors up 0.9% and goods producers gaining 1.5%.
Of the 20 sectors tracked by Statistics Canada, 16 posted increases in Q1. Accommodation and
food recorded a 15% expansion, as authorities lifted restrictions. For March, the agency said
client-facing industries led growth, with manufacturing and construction also expanding .
