Economic News and Forecasts
Periodically, as a member service, DHI Canada prepares a review of economic activity and forecasts from sources such as Statistics Canada, the Bank of Canada and the Canadian chartered banks. This information is captured on this page.
Bank of Canada Boosts Bank Rate
June 7, 2023 - In a move that caught several pundits off guard, the Bank of Canada (BoC) raised its benchmark rate by 25 basis points to 4.75%. What was surprising was the timing - many felt that, while an increase was in the cards, it wouldn't happen until the July meeting of the BoC's Board of Governors. The Bank cited "stubbornly high" underlying inflation, continued strength in the economy, strong consumer demand for goods and services, an increase in housing market activity, and continued tight labour markets in its decision. In addition, the tone of the announcement has moved from neutral to slightly hawkish, indicating that more interest rate increases may be in the offing. You can read the announcement here.
Q1 2023 GDP Surprise!
June 1, 2023 - Statistics Canada announced the Q1 GDP results yesterday - GDP grew by an annualized 3.1% in the quarter (versus the estimate of 2.4% noted in the article below), driven almost entirely by January growth (revised upward again to 0.7%) - March was flat (0.0% change). Surprisingly, household spending on both goods and services continued strong; this is in spite of increasing interest rates, a drop in household disposable income and an uptick in unemployment. Non-residentiual structures, machinery and equipment posted a 0.5% increase in the quarter, after falling 1.3% in Q4 of 2022. You can read all about it here. Based on the Q1 result, the Bank of Canada may reconsider its pause on interest rate hikes, and some pundits are anticipating a rate increase in June or July.
In March, the construction sector as a whole dropped by 0.1% compared to February, driven by a decrease in new home building. StatsCan estimated April GDP would post an increase of 0.2%. The March announcement is available here.
February GDP, January GDP Revision and March/Q1 Projection
April 28, 2023 - Statistics Canada came out with a basket of news today - some good, some not so good, but nothing outright bad or ugly. January GDP was revised upward to 0.6% from 0.5%. For February, growth was a more modest 0.1% - well down from their flash estimate of 0.5%. Construction activity posted was up 0.3% across-the-board in February. This was also the fifth consecutive month that the sector as a whole was up, and the second in which all subsectors were up, including non-residential (which also increased 0.3%). Finally, the projection for Q1 GDP is an increase of 2.4% annualized (0.6% for Q1 compared to Q4 2022). Now, the "not so good" - StatsCan's flash estimate for March GDP is a decline of 0.1%, meaning that almost all of the Q1 growth happened in January. Some pundits are saying that we are now headed into a "mild" recession in Q2 and Q3 (for what it's worth, we agree). The StatsCan article is available here.
January GDP Up by 0.5%
March 31, 2023 - Statistics Canada released January 2023 GDP, showing a 0.5% increase over December. Seventeen of twenty industrial sectors posted increases, indicating the gains were fairly evenly spread. Non-residential building construction grew by 0.3% - it's second consecutive rise. Wholesale trade (+1.8%), mining, quarrying and oil and gas extraction (+1.1%) and durable goods manufacturing (+1.2%) led the growth parade on the goods side of the economy, with accommodation and food services (+4.0%) the big winner on the services side. StatsCan is forecasting 0.3% growth for February, hinting that the Bank of Canada's interest rate tightening last year may be starting to pay off. Read the StatsCan article here.
Q4 GDP Results Released by Statistics Canada
February 28, 2023 - StatsCan today released the 4th quarter GDP results, showing no increase in economic activity in the thrid quarter. Year-over-year, preliminary results indicate the economy grew by 3.4%, led by a 4.8% increase in household consumption. Gross fixed capital formation, which includes non-residential construction, fell for the year by 1.5%, with residential construction taking the biggest hit (down by 11.1%). Non-residential structures, machinery and equipment grew by 7.8% in 2022, although it was down by 5.5% in Q4, mostly due to a decline in machinery and equipment. Non-residential construction actually grew by 2.5% in Q4. The rapid increase in the Bank of Canada's policy rate (from 0.25% in March to 4.25% by the end of the year) certainly had a dampening effect on housing activity, but did not noticeably rein in consumer spending. The 3.4% year-over-year increase is well below the 4.3% we forecast in December 2021. This is due to high inflation and tightening monetary policy, neither of which we (or most other forecasters) foresaw at the time. You can read the full StatsCan report here.
Bank of Canada Interest Rate Setting Lower Thank Expected - Is That a Good Thing?
October 26, 2022 - The Bank of Canada (BoC) is full of surprises. At today's interest rate announcement, it increased the benchmark rate by 50 basis points, to 3.75%. This is less than the 75 basis points hike that had been expected, and is an indication that the BoC feels less need of strong intervention on its part to slow inflation growth. Although much of the announcement continued to be hawkish, there was a dovish note - the announcement said "The effects of recent policy rate increases ... are becoming evident in interest-sensitive areas of the economy," and went on to site house prices and both household and business spending. At the same time, the announcement said that "Near-term inflation expectations remain high, increasing the risk that elevated inflation becomes entrenched." The Bank also cut its GDP growth expectation for Canada in 2023 in half, to just under 1%, suggesting that we may slide into recession in early 2023.
Is this slower pace of rate increases a good thing? We feel the answer is "no" - the BoC signalled that further increases are coming, so borrowers will feel the pinch, and their reason for slowing the pace - a stalling in GDP for the balance of the year and into early 2023 - does not bode well for the economy. While it has not come right out and said that we may be headed for recession, the Bank's low growth projection for 2023 and its comment on "flat" economic activity in the next 2-3 quarters, points to tough economic times ahead. You can read the announcement here.
Creeping Towards Recession? July GDP Results, August Flash Forecast, Released
September 29, 2022 - Statistics Canada released July GDP figures today. Month over month, GDP grew by 0.1%, as compared with their earlier flash estimate of a decline of 0.1%. Construction overall was down 0.2%; unfortunately, no separate information on ICI construction was available. StatsCan's flash estimate for August called for no growth. These latest numbers, combined with the Bank of Canada's resolve to continue to raise interest rates to control inflation and the still-high inflation rates, indicate we may be moving to a (hopefully mild) recession in early 2023. You can read the report here.
Bank of Canada: Supersize Me (Again)!
September 8, 2022 - As expected, the Bank of Canada (BoC) raised its benchmark rate yesterday - this time by 75 basis points, to 3.25%. This puts the rate into what the Bank calls "restrictive" territory; that is, it's above the neutral rate of 3% and is designed to act as a brake on economic growth. The ultimate expectation is that this policy, combined with continued quantitative tightening, will reduce the inflation rate. Inflation fell in July, thanks mainly to a drop in gasoline prices, but inflation excluding gasoline increased. The BoC announcement stated "Given the outlook for inflation, the Governing Council still judges that the policy interest rate will need to rise further," with the actual amount of future increases dependent on how well current economic policy works in returning inflation to the 2% target. The Bank expects that the economy will continue to cool in the last half of the year (Q2 GDP growth was weaker than projected, economic activity in May and June was relatively flat and the BoC's forecast for July calls for a 0.1% decline). The text of the Bank's announcement is available here.
Q2 GDP Up, Mainly Due to Growth in April - Statistics Canada
August 31, 2022 - Statistics Canada today released figures on GDP growth for the second quarter of the year. Overall, the economy grew at an annualized rate of 3.3%. This follows a 3.1% increase in Q1. Most sectors were up although residential construction took a major hit, falling by 27.6%. This is the result of the Bank of Canada's interest rate hikes in the quarter, which drove higher mortgage interest rates. Non-residential construction grew by 2.6%, although most of this was due to an increase in engineering structures construction. The primary drivers of growth in the quarter were increased business investment in inventories; non-residential structures, machinery and equipment; and household spending on services and semi-durable goods. Notably, most of the growth took place in April, with May and June showing 0.0% and 0.1% month-over-month growth respectively. You can read StatsCan's report here. StatsCan's flash estimate for July calls for a 0.1% decline in GDP.
BoC Hikes Benchmark Rate by 100 BP!
July 13, 2022 - The Bank of Canada (BoC) today raised its benchmark rate by a full 100 basis points (bp), taking it to 2.50%. An increase of 75 bp has been expected ever since the US Federal Reserve's Federal Open Market Committee implemented a 75 bp increase in its overnight rate in June, but a full 100 bp indicates an extremely hawkish stance. The Bank said it expects inflation to be around 8% for the next few months - driven by the war in Ukraine, continuing supply chain disruptions, robust domestic demand and a boost in the value of exports - before cooling to 3% by the end of 2023 and 2% (the target rate) by 2024. The BoC forecasts GDP will grow by an annualized 4% in Q2 and 2% in Q3, winding up the year at 3.50%. The overall tone of the announcement is hawkish, saying it "continues to judge that interest rates will need to rise further, and the pace of increases will be guided by the Bank’s ongoing assessment of the economy and inflation," and that it "is resolute in its commitment to price stability and will continue to take action as required to achieve the 2% inflation target." Implicit in this statement is that the BoC is likely to raise rates above the nominal neutral policy rate range (interest rates that neither stimulate nor slow down the economy) of 2% to 3% - and perhaps well above that - until inflation is tamed. You can read the announcement here.
April GDP and May Forecast Released by Statistics Canada, and it's About as Expected
June 30, 2022 - Statistics Canada today released April GDP, showing a 0.3% growth over March's figures. This is slightly higher than the 0.2% forecast (see below). In investment in non-residential construction, all sectors showed growth: industrial construction was up 1.7%, led by gains in Ontario; commercial construction advanced by 1.5% thanks to a large retail project in Vancouver; and institutional grew by 1.0%, led by gains in Quebec. StatCan is calling for a contraction in GDP of 0.2% in May, with output expected to be down in the mining, quarrying and oil and gas extraction, manufacturing and construction sectors. You can read the report on GDP here, and on construction here.
Surprise! Or not - BoC Hikes Benchmark Rate Another 50 BP
June 1, 2022 - As expected, the Bank of Canada (BoC) increased its benchmark rate another 50 basis points to 1.5%. The announcement of the rate hike was accompanied by a very hawkish statement, affirming that the Bank's position is “interest rates will need to rise further.” The Bank has already identified its "neutral" interest rate - one which applies neither the brakes or the gas to the economy - as between 2% and 3%, so they clearly feel they have room for further increases, especially in light of the current high inflation. This is further borne out by their statement "the Governing Council is prepared to act more forcefully if needed to meet its commitment to achieve the 2% inflation target." Clearly, there are more rate hikes to come. The Bank's announcement is here.
Q1 GDP, March GDP and Flash Forecast for April Reported by StatsCan
May 31, 2022 - Statistics Canada reported that Q1 2022 GDP came in at an annualized rate of 3.1% - substantially lower than the 5.7% indicated last month (see article below) due to a drop in international export volumes. Business investment in non-residential structures was up 2.9% compared to Q4 2021. The report is available here. Meanwhile, March GDP posted a 0.7% increase in March compared to February. StatsCan also revised their February figure to 0.9% (down from 1.1% - see below). For the month, non-residential building construction rose 0.9%; while all subsectors posted increases, commercial construction contributed most to the increase, partly due to a retail development in Mount Royal, QC. April's flash forecast is for a 0.2% increase compared to March. Construction activity is expected to be down in the month, but the report does not break the decrease down between residential and non-residential. The March report is available here. The Bank of Canada (BoC) is still expected to increase its benchmark interest rate tomorrow by another 50 basis points; BoC Chair Tiff Macklem has already poured cold water on the idea of a larger increase in June, but most pundits expect that other rate increases are in the cards this year as the Bank tries to cool down inflation without driving the economy into recession.
Canadian GDP Figures for February Released
April 29, 2022 - Statistics Canada said today that Canada's GDP grew by 1.1% in February. This is higher than the 0.8% growth anticipated in their February flash estimate, and points to a 1.4% increase for Q1 GDP over Q4, indicating an annualized rate of 5.7%. This will do nothing to cool the Bank of Canada's intention to continue hiking interest rates this year - Bank Chair Tiff Macklem has already suggested they will increase the overnight rate by as much as another 75 basis points (to 1.75%) at their Board of Governors' June 1 meeting. Canada's estimated Q1 growth of 1.4% contrasts with the US's contraction of 1.4% (annualized). Non-residential construction increased by 1.4% in February, although most of the gain was in alterations and improvements. You can read the full report here.
Another Interest Rate Hike by the Bank of Canada Announced
April 13, 2022 - The Bank of Canada (BoC) announced another expected increase in its benchmark interest rate - this time doubling the rate to 1.00% and citing increasing inflationary pressures. The BoC forecast for the CPI has increased to almost 6% in the first half of the year, and is now expected to remain well above the Bank's "control range" of 1% to 3% throughout the year. At the same time, the Bank announced it would begin quantitative tightening on April 25. The announcement reiterated March's statement that interest rates will need to rise further, and many pundits expect they will end the year at 2.00%, with the increases liikely happening in 0.25 basis point increments.
The Bank also revised its growth outlook for Canada, reflecting recent strong economic conditions. It is now calling for 4.25% increase in GDP this year, 3.25% in 2023 and 2.25% in 2024. At the same time, they are forecasting a slight decrease in their global GDP forecast due to increased volatility due to the war in Ukraine and tightening of global financial conditions, as many central banks are increasing their overnight rates and also entering a period of quantitative tightening. The full announcement is available here.
GDP Numbers for January Released
March 31, 2022 - Statistics Canada today released the January GDP numbers. The economy overall posted a 0.2% increase for the month, in spite of COVID-related lockdowns. Leading the charge were construction (up 2.8%), utilities (a 4.0% increase) and retail spending (up 2.6%). Non-residential construction was up 0.5% overall, with growth in industrial, commercial and residential building. February's flash estimate calls for 0.8% growth. You can read the full report from StatsCan here.
Bank of Canada Increases Interest Rates as Expected
March 2, 2022 - The Bank of Canada (BoC) today announced it was increasing its benchmark interest rate to 0.50%. This is a quarter-point hike from the "effective lower bound" rate of 0.25% that has been in effect since the onset of the pandemic. In increasing its rate, the BoC cited the current relatively high inflation rate (5.1% in January - well above the Bank's 2% target), strong economic growth, quick recovery from the Omicron variant of COVID-19, and the effect tht Russia's invasion of the Ukraine is having on food and energy prices. Tha Bank noted "As the economy continues to expand and inflation pressures remain elevated, the Governing Council expects interest rates will need to rise further," and also talks about quantative tightening (decreasing its portfolio of Government of Canada bonds). While acknowledging that there continues to be concern about the emergence of new strains of COVID-19, the tone of today's announcement was generally hawkish, and we can expect additional increases this year - perhaps as soon as April. You can read the announcement here.
Q4 and Full Year 2021 GDP Numbers Are In, And They Look Pretty Good!
March 1, 2022 - Statistics Canada today released Q4 and full year GDP results. StatsCan reports the economy grew 1.6% in Q4, an annualized rate of 6.4%, and that growth for the full year was 4.8%. Growth for the quarter was above the 5.8% the Bank of Canada estimated in its January Monetary Policy Report. Growth for the year was slightly above the 4.3% we forecast in our November 2021 update. Investment in non-residential structures, machinery and equipment was up by 2.1% in Q4. The full report is available through StatsCan.
This relatively strong GDP performance, combined with higher rates of inflation, virtually assures the Bank of Canada will raise its benchmark rate at Wednesday's meeting.
Bank of Canada January Monetary Policy Report Sets the Stage for Interest Rate Hikes
February 10, 2022 - The latest Bank of Canada Monetary Policy Report (MPR), released January 26, builds on their January 26 interest rate announcement (see below) and makes it very clear that an interest rate increase can be expected sooner rather than later. The MPR amplifies statements in the interest rate announcement about the absorption of economic slack and highlights the rising rate of inflation as a danger to the economy. You can read the MPR on the Bank's website.
StatsCan Releases November 2021 GDP Growth, Sneak Peek at Q4 and FY2021 Numbers
February 1, 2022 - Statistics Canada figures released today showed that Canada's GDP rose 0.6% in November, with growth in both goods- and services-producing industries at about that level. Of interest to DHI members, non-residential construction grew by 0.5% in November; this increase came from institutional construction, as both industrial and commercial construction fell in the month. StatsCan estimates that December GDP will be essentially unchanged, that Q4 economic growth will come in at 1.6% and growth for calendar 2021 will be 4.9%. The full report is available on the Statistics Canada website.
BoC Holding Interest Rate Again, But Maybe For The Last Time
January 26, 2022 - The Bank of Canada (BoC) announced today that it is again holding its benchmark interest rate at the effective lower bound of 0.25%, but it has removed its "extraordinary forward guidance", meaning that we can expect the rate to rise as early as early March. The BoC said that economic slack has now been absorbed, pointing to the increase in employment in the last year (job numbers are now above pre-pandemic levels); the probable continuing high inflation due to supply chain bottlenecks and a tightening labour market; a robust, if uneven, international economic recovery; strong Canadian GDP growth; and a weaker-than-expected effect of the Omicron COVID-19 variant.
The Bank is forecasting Canadian GDP to grow by 4.5% in 2021 and 4% in 2022. It also expects inflation to be about 5% in the first half of 2022, easing to 3% by year-end. This expectation means that the BoC will revert to its traditional role of using monetary policy to control inflation. In line with future interest rate increases, the BoC said it would consider reducing its holdings of Government of Canada bonds (part of its quantitative easing program) when it beging hiking rates. At present, BoC policy is to maintain current levels of bond holdings. You can read the Bank's full announcement here.
US Fed Also Opens The Door To March Interest Rate Hikes
January 26, 2022 - The Federal Reserve's Federal Open Market Committee (FOMC) , like the Bank of Canada (BoC), held the line on interest rates but, again like the BoC, signalled that rates could soon go up. Today's statement by the FOMC said rate hikes "will soon be appropriate" in light of continuing high inflation and strength in the labour market. This could come as quickly as early-March. Also, like the BoC, the Fed said it could begin shrinking its balance sheet by reducing its bond holdings when rate increases kick in.
US Fed Sounding More Hawkish
December 16, 2021 - The US Federal Reserve finished two days of meetings yesterday and issued a statement speeding up the end of its quantitative easing (QE) program. Original plans would have had it completely wound down by mid-2022 but, with yesterday's announcement, it looks to finish in March. This opens the door to an accelerated timetable for rate hikes next year, and an increase in the number of hikes from the previously planned one to as many as three. Given the action today by the Bank of England in raising its rate and the sped-up winding down of the European Central Bank's QE program, it gives more credence to a possible boost in the Bank of Canada's overnight rate as early as April.
Federal Government's Fall 2021 Economic Statement
December 15, 2021 - the federal government yesterday presented their fall 2021 economic statement. Their forecast for GDP growth was 4.6% in 2021, 4.2% in 2022 and 2.8% in 2023; the 2021 figure was lower by 1.2 percentage points than projected in the April budget, but 2022 and 2023 are"broadly in line with budget 2021." The government also adjusted its budget deficit esimates for last year and this year (previous estimates are in brackets; numbers in billions of dollars): 2020-21 -$372.7 billion (-$354.2 billion) and 2021-22 -$144.5 billion (-$154.7 billion). They are forecasting that the deficit will be down to -$13.1 billion by 2026-27.
BoC Interest Rate Announcement - Same As It Ever Was
December 8, 2021 - The Bank of Canada announced its overnight lending rate today and, to no one's surprise, it remains at 0.25%. The announcement reaffirms the Bank will not raise the rate until current economic slack is absorbed, sometime in the middle quarters of 2022. For interest rate doves, the BoC did acknowledge that the future course of the Omicron variant, high interest rates, and supply chain disruptions (especially due to the recent flooding in BC) could weigh on economic growth and cause them to maintain the current overnight rate at its current level until later in 2022. The Bank also notes that, in spite of high employment and decreasing unemployment, GDP still remains 1.5% below pre-pandemic levels. You can read the text of the BoC announcement here.
DHI Canada's November Economic Forecast Update/Review Now Available
December 2, 2021 - We're pleased to present DHI Canada's November 2021 economic forecast. While there was good news, in the form of a higher-than-expected Q3 GDP, there remain considerable uncertainties: the course of COVID-19, the inflation outlook, future monetary policy, and the impacts of weather (especially in the west). Read all about it here.
Even StatsCan Can Be Wrong - Q3 GDP Outperforms!
December 2, 2021 - Statistics Canada released Q3 GDP figures on November 30, reporting 1.3% quarter-over-quarter growth; annualized, that's 5.3%. This result exceeds the 2.0% annualized growth they predicted in October. The economy was driven by consumer spending on services (up by 6.3% over Q2) and semi-durable goods (up by 14.0% quarter-over-quarter). At the same time, they released September GDP figures, showing a 0.1% growth over August. Finally, they also provided a flash estimate for October, calling for a healthy 0.8% boost. Read the Q3 article here and the September report here.
August GDP Growth Disappoints; Q3 Estimate Not Rosy Either
October 29, 2021 - Statistics Canada today released the August GDP figures, showing growth of 0.4% over July. This contrasts with their flash estimate of 0.7% (see below). The August increases was fueled by growth in services-producing industries, which were up 0.6%; goods-producing industries fell 0.1%. In good news for our industry, non-residential building construction grew by 0.4%. Statistics Canada is projecting that the economy will not show any growth in September and that Q3 growth will be 0.5% compared to Q2. Based on this, the annualized Q3 projection is about 2.0%. You can read the full article on the StatsCan website.
Bank of Canada Announcement on Interest Rates Sounds a Hawkish Note
October 27, 2021 - The Bank of Canada announced today that, while it was maintaining the interest rate at the effective lower bound of 0.25%, it was ending its quantitative easing (QE) program and moving to "reinvestment only" - purchasing Government of Canada bonds solely to replace maturing bonds. The Bank also reduced its Canadian GDP growth forecast to 5.1% for 2021 and 4.3% for 2022, with a slightly increased growth rate of 3.7% for 2023. It is now forecasting that economic slack will be taken up "in the middle quarters of 2022", opening the door for an increase in the bank rate as soon as April; this is earlier than previously called for. You can read the announcement here.
Stats Can Says July GDP Better Than Flash Estimate; Releases August Flash Estimate
October 1, 2021 - Statistics Canada today released the July GDP figures. While their flash estimate called for a decline of 0.7%, the actual decrease was only 0.1%; 13 of 20 industrial sectors showed increases, led by accommodation and food services. Construction fell by 0.9%, due largely to a decline in residential building construction. Non-residential construction, by contrast, was up 0.5%, with an increase in institutional building construction more than offsetting drops in commercial and industrial construction. StatsCan's flash estimate for August calls for a 0.7% increase in real GDP. The full announcement is available here.
A "No News" Announcement from the BoC on Interest Rates
September 8, 2021 - The Bank of Canada (BoC) held the line on interest rates today and is making no change to its quantitative easing (QE) program. Interest rates remain at the effective lower bound of 0.25% and QE stays at $2 billion per week. The BoC's announcement noted the decline in Q2 GDP, reflecting "a contraction in exports, due in part to supply chain disruptions, especially in the auto sector" and a pull-back in housing market activities. The Bank did not provide an updated economic outlook, saying only that the global economic recovery had "solid momentum" going into Q3, but sounding a cautionary note about COVID-19 case counts and global supply chain disruptions. You can read the BoC announcement here.
Stats Can Announces Q2 2021 and June 2021 GDP, and Provides Flash Estimate for July
August 31, 2021 - Statistics Canada announced today that Q2 2021 GDP fell by 0.3% compared to Q1. This is an annualized rate of decline of 1.2%. It follows three consecutive quarters of GDP growth after the Q2 2020 pandemic-related decline of 11.3%. Investment in non-residential construction increased in the quarter at an annualized rate of 1.2%. StatsCan's article is available here.
June GDP matched expectations (see below), growing by 0.7% compared to May. StatsCan reports that 15 of 20 industry subsectors posted growth in the month. Non-residential construction fell by 1.1%, led by declines in commercial and industrial construction, although institutional construction grew. Stats Can's flash estimate for July GDP calls for a 0.4% decline. You can read about it in more detail here.
GDP News from Statistics Canada - April, May and June
July 30, 2021 - Statistics Canada today released its May GDP figures, revised April GDP and provided a preliminary estimate for June. StatsCan originally reported a 0.3% decline in April GDP (story below); this has been revised downward to 0.5%. May, as they had forecast, came in down 0.3%. The better news is that, as the economy reopens across the country, June is expected to be back on the plus side with a 0.7% increase and Q2 should post an overall increase of 0.6% compared to Q1 (an annualized rate of 2.4%). Overall, non-residential construction in May was up marginally by 0.1%; industrial construction was a downward drag, while commercial and institutional construction both grew. The StatsCan article is available here.
DHI-C's July 2021 Economic Review and Forecast
July 8, 2021 - DHI Canada is pleased to release our latest economic review and forecast - considerably sunnier than that of December 2020, thanks to the global economic recovery, the apparent retreat of COVID-19 and the accompanying reopening of the economy. There may still be some unevenness ahead, and the non-residential construction sector has a little way to go before recovering to pre-pandemic levels, but we have increased our forecast for GDP growth this year. You can read the whole thing here.
April 2021 GDP Report from Statistics Canada
June 30, 2021 - Statistis Canada released its April GDP figures today. GDP shrank in April by 0.3% - well below the initial expectation of a 0.8% contraction. This is the first decline in GDP after 11 months of growth. Non-residential building construction grew by 1.1% in the month. StatsCan also issued a preliminary estimate for May GDP, forecasting another 0.3% shrinkage. The full report is available on the Statistics Canada website.
Revised 2020 GDP Figures, with Provincial Breakdowns, Released by Statistics Canada
May 3, 2021 - Statistics Canada released revised GDP figures for 2020 today, changing shrinkage in the economy to 5.3% from the 5.4% reported in March. The provincial/territorial GDP breakdown showed all provinces down compared to 2019, with only the Yukon (1.1% growth) and Nunavut (3.5% growth) bucking this trend. Services-producing industries contributed more to the overall decline than did goods-producing industries, with transportation and warehousing; arts, entertainment and recreation; accommodation and food services; and other services (excluding public administration) being especially hard hit. In the service sector, only finance and insurance industries showed growth in all jurisdictions, while real estate and rental/leasing activities, were up in most regions. The full text of the announcement is here.
Bank of Canada Ups 2021 GDP Growth Estimate
April 22, 2021 - The Bank of Canada yesterday announced it is continuing to keep interest rates at the lower effective bound of 0.25% and is scaling back its quantitative easing (QE) support - purchases of Government of Canada bonds - from $4 billion to $3 billion per week, effective April 26. They have also scaled up their forecast for GDP growth to 6.50% in 2021 - a significant increase over the 4.0% growth forecast in their January 2021 Monetary Policy Report (MPR). The Bank now anticipates growth moderating to 3.75% in 2022 and 3.25% in 2023; the January MPR had estimted 4.8% and 2.5% respectively. The announcement calls for inflation to return to a sustainable 2% (the midpoint in the Bank's inflation-control range) in the second half of 2022 and implies that interest rates could rise at that time. The Bank notes this forecast of recovery is sensitive to the continuing evolution of the pandemic and the pace of vaccinations. You can read the announcement here.
Bank of Canada Holds the Line on Interest Rates
March 10, 2021 - The Bank of Canada announced today it is keeping interest rates at the effective lower bound of 0.25% despite the improved GDP in Q4 2020. The tone of the announcement remained somewhat dovish: "While economic prospects have improved, the Governing Council judges that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved." Overall inflation is currently close to 1%, with core inflation between 1.0 and 1.3%. The monetary policy support mentioned consists of maintaining interest rates where they are and continuing the bond repurchase (quantitative easing) program at the current level of at least $4 billion per week. The announcement referenced the Banks January projection that inflation wouldn't return to a sustainable 2% and economic slack would not be absorbed until into 2023. The full text of the Bank's announcement is available here.
Statistics Canada Releases Q4 2020 and Calendar 2020 GDP
March 4, 2021 - Yesterday, Statistics Canada released GDP figures for Q4, along with GDP for the full year. In Q4, GDP grew 2.3% (an annualized rate of 9.5%) while, for the year, it fell an unprecedented 5.4%. Non-residential construction fell 10.9% in the quarter, reflecting weak demand for office buildings and shopping malls - victims of remote working and online shopping, respectively. For those of you keeping score, DHI Canada's forecast was for 2.5% growth in Q4 and a decline for the full year of 5.8% - close, but no cigar. You can read the article from StatsCan here.
2021 DHI-C Economic Forecast
December 16, 2020 - DHI Canada today has released our 2021 economic analysis and forecast. We're predicting a few bumps in the road yet as we move into recovery after the pandemic-related recession earlier this year. A slightly abbreviated version of this forecast will appear in the January 2021 issue of Door Safety + Security magazine. You can read the longer version here.
Q3 2020 GDP Released
December 1, 2020 - Statistics Canada released the 2020 third quarter GDP. The economy grew 8.9% in real terms in Q3 compared to Q2; this is an annualized rate of 40.6% Growth is less than anticipated (StatsCan's flash estimate for Q3 was about 46%), but was still a record-breaking level. Non-residential building activity decreased by 0.3% compared to the second quarter. so there is slight continuing weakness in our sector. You can read the StatsCan release here.
Summary of Bank of Canada's Monetary Policy Report, October 2020
November 2, 2020 - The Bank of Canada (BoC) issues a quarterly Monetary Policy Report (MPR), which we use as one of the inputs to our Economic Forecasts. In the April and July MPR, the Bank departed from its practice of including definitive economic forecasts, but returned to it in the October issue. We thought a digest of the MPR might be of interest to members and others, so we have prepared one. If you'd like to read the entire MPR, you can do so here.
StatsCan Releases August GDP; Q3 Flash Estimate
October 30, 2020 - Statistics Canada today released August GDP figures, showing the economy grew 1.2% month over month - a much slower pace than the 3.1% revised growth in July. The news was not so rosy for non-residential construction, which contracted a further 1.7%, with all components (industrial, commercial and institutional/governmental) being down. By contrast, residential construction grew 1.8% in the month. StatsCan also provided flash estimates for September (0.7% growth over August) and Q3 (approximately 10% growth compared to Q2, or an annualized rate of about 46%). Even with the relatively robust growth in Q3, we are still about 5% below pre-pandemic GDP levels. The release is available from StatsCan.
Bank of Canada Rate Still Holding at 0.25%
October 28, 2020 - The Bank of Canada today confirmed it is holding the overnight rate at the effective lower bound of 0.25%. In its release, the Bank indicated it would continue to maintain this rate until its target inflation rate of 2.0% is "sustainably achieved"; they estimate this will not happen "until into 2023". At the same time, the Bank will be gradually reducing purchases under its quantitative easing (QE) program to $4 billion per week (down from $5 billion when the program was initiated); between maintaining the rate at 0.25% and reducing QE purchases, the Bank estimates it will be providing at least as much monetary stimulus as before.
The Bank is projecting a 5.5% decline in Canada's GDP for 2020, followed by two years in which growth will average 4%. They note that "Growth will likely be choppy as domestic demand is influenced by the evolution of the virus and its impact on consumer and business confidence."
July GDP Figures Released
September 30, 2020 - Statistics Canada released the July GDP figures today. With month-over-month growth of 3%, GDP growth is slowing down. This is the thrid consecutive monthly increase in GDP, but it still leaves the economy 6% below February's pre-COVID levels. Construction activity was up by 0.6%, due to increased activity in residential and repair construction. Non-residential building fell by 3.0%. The flash estimate for August indicates a 1.0% increase in total GDP over July. You can read the release from StatsCan here.
Canadian Bank Rate Remains Unchanged at 0.25%
September 10, 2020 - To no one's suprise, the Bank of Canada announced yesterday it was maintaining the bank rate at the effective lower bound of 0.25%. In the press release, the Bank noted that recovery in the third quarter will probably be stronger than predicted in their July Monetary Policy Report, but this will be followed by a "protracted and uneven recuperation phase, which will be heavily reliant on policy support." The reference to policy support is confirmation that interest rates will likely remain at their current levels for some time to come. This was further clarified in the release: "The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved." The release sounded a note of caution, noting that the path of the recovery will be dependent on what happens with COVID-19, and stated the Bank will maintain its current quantitative easing program, under which they are repurchasing at least $5 billion worth of Government of Canada bonds each week. You can read the full announcement here.
Construction Investment and Building Permit Activity
September 3, 2020 - Last week, Statistics Canada released information on investment in construction (for June 2020) and building permit activity (for July 2020). While non-residential construction in June exeeds pre-COVID levels and is actually running ahead of June 2019, there is no corresponding recovery in non-residential building permits: as of the end of July, it's still down more than 13% compared to February 2020 and over 21% below July 2019. You can read our analysis here.
Q2 2020 GDP Released by Stats Can - and as Expected, It's Not Good News
August 28, 2020 - Statstics Canada reported on Canadian Q2 GDP today. The economy shrank by 11.5% compared to Q1 - an annualized decline of 38.7%. This is marginally better than predicted in July (see below), but still "the steepest [decline] since quarterly data were first recorded in 1961". All sectors of the economy were down. Non-residential business building construction fell in Q2 by an annualized 11.8%, while government investment in non-residential buildings was down 4.1%. As a comparison, the total US GDP shrank at an annual rate of 31.7% in Q2. With the reopening of the economy, we're expected to be back in growth mode in Q3. Full information is available on the Stats Can website.
May 2020 GDP Grows; Stats Can Releases Flash Estimates for June and Q2
July 31, 2020 - Statistics Canada today released their May GDP figures, showing growth of 4.5% over April, with 17 of 20 industrial sectors posting increases. Non-residential construction was up 56.7%, as all three subsectors (industrial, commercial and institutional) recorded double-digit increases. The flash estimate for June calls for a further 5% growth as provincial economies continue reopening. However, Q2 GDP is expected to show a 12% decline compared to Q1 (approximately a 40% annualized decline). You can read the article here.
Bank of Canada Holds Interest Rates, Forecasts GDP Decline in 2020 of Almost 8%
July 15, 2020 - The Bank of Canada today held interest rates steady at 0.25%, which it calls the effective lower bound. In its release announcing the rate, the Bank said "The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved," so we can expect to see this rate for the forseeable future, probably well into 2021. At the same time, the Bank forecast a contraction in GDP for 2020 of 7.8% before returning to growth (5.1% in 2021 and 3.7% in 2022). The Bank will also continue its quantitative easing program. The full press release is available on the Bank's website.
Government of Canada Releases Economic and Fiscal Snapshot
July 15, 2020 - The Government of Canada (Department of Finance) last week released an economic and fiscal snapshot for Canada's economy in the wake of COVID-19. They are forecasting a contraction in GDP for 2020 of 6.8% followed by growth of 5.5% in 2021. This is generally within the ranges identified by private sector forecasters. Unemployment in 2020 is expected to be about 9.8%, declining to 7.8% in 2021. They are also calling for a federal deficit in 2020-21 of $343.2 billion - about 10 times that projected deficit of $34.4 billion for 2019-20. Some $227.9 billion of the deficit will result from the government's COVID-19 Economic Response Plan. This will bring the accumulated federal debt to just over $1 trillion, or 49.1% of GDP. Full details are available here.
April 2020 GDP and Flash Estimate for May Released
June 30, 2020 - Statistics Canada today released April 2020 GDP figures. Their earlier "flash" estimate called for a decline of 11% compared to March, but the results were actually marginally lower than that, at -11.6%. The carnage was widespread, with all 20 reporting sectors seeing declines. Non-residential construction fell by 36.0% as commercial, public and industrial construction were all down by double-digits. The bright spot in today's announcement was the "flash" estimate for May, which indicates an increase of approximately 3.0% as a result of reopening initiatives across the country. Read the release here.
June 2020 Economic Forecast
June 29, 2020 - Fearlessly looking into our crystal ball, DHI Canada has prepared an economic review and updated forecast for the balance of 2020 and into 2021. As grisly as it is, you can read it here.
StatsCan Releases March 2020 GDP and Flash Estimate of April 2020 GDP
June 1, 2020 - Statistics Canada released a "flash" estimate for April 2020's Gross Domestic Product, forecasting an 11% decline for the month compared to March. They note that this is a preliminary estimate and that it will be revised as more information becomes available. However, taken together, the March and April declines will likely be the largest consecutive monthly decreases on record. March GDP fell by 7.2%, with almost all sectors being down as a result of measures taken to restrict the spread of COVID-19. Construction (of all types) was down by 4.4%, the largest decrease since the 3.3% contraction experienced by the sector in January 2009. Please see here for more information.
Q1 2020 GDP Down, But Not As Far As Expected
May 28, 2020 - Statistics Canada today released figures for the first quarter's GDP. They show a decline of 2.1% compared to Q4 2019, or an annualized decrease of 8.2%, due to COVID-19. Pundits had expected a 10% annualized decline, so the damage is not as severe as originally anticipated. This marks the sharpest decrease since economic output fell 2.3% (quarter over quarter) in the first quarter of 2008 as a result of the financial crisis. Non-residential construction actually showed an increase over Q4 of 0.5%, although StatsCan notes that "Technical and operational delays were encountered in the production of source data on buildging construction investment" and warned that larger than usual revisions may be made as actual data becomes available. Full details are available from StatsCan's website.
2020 Economic Forecast
January 2020 - Our 2020 economic forecast, written in November 2019 and published in Door Security + Safety magazine's January issue calls for moderate growth in 2020's Canadian GDP (1.4%) amid a general softening of the economy. At the time, we identified uncertainty around pending resolution of international trade disputes, but rejected the idea of a recession. You can read the details here.
For economic forecasts and news from 2017 to the end of 2019, please click here.