The lastest statistic for Canadian GDP points to above-trend growth continuing for the Canadian economy, including further recovery of the energy sector, according to a report by RBC.
Canadian GDP posted a solid 0.2 per cent increase in April and there was further evidence of broadening growth across sectors which has been a significant factor in the Bank of Canada’s recently rosier take on the economy. RBC says that the decent momentum to start Q2 fits with its forecast for 2.7 per cent growth in the quarter.
That would be consistent with recent comments from BoC Governor Poloz that growth likely moderated relative to Q1’s 3.7 per cent pace but remained above trend. There was also further evidence of recovery in the energy sector, supporting the bank’s contention that adjustment to lower oil prices is largely complete.
Overall, the April GDP report is consistent with the Bank of Canada’s recent narrative that broadly-based growth is steadily eroding excess capacity in the economy and that 2015’s rate cuts have “done their job.”
The bank’s more hawkish tone has markets pricing in about 70 per cent odds of a rate hike as soon as July. April’s GDP, if matched by an upbeat Business Outlook Survey soon to be published, should reinforce market expectations.
Growth was broadly based with 14 of 20 subsectors growing in April and 17 of 20 seeing higher output relative to one year ago.
While manufacturing saw a 0.9 per cent decline in April, output in the sector was still up two per cent year-over-year.
