Canada’s gross domestic product posted better than
expected growth in the first three months of this year. GDP, which is the total value of all goods
and services produced by the economy, increased by an annualized rate of 2.2%
in the first quarter, up from 1.7% for the same period a year ago. Analysts had been forecasting a 1.7%
increase.
Q1 GDP was up 0.5% compared to Q4 of 2024.
The figures from Statistics Canada suggest the
economy is holding its own, but many experts are warning that the numbers may
be misleading. They say businesses and
industries likely boosted production in an effort to “front run” wide-ranging
tariffs threatened by the United States.
The U.S. president announced sweeping, global tariffs on April 2, which
he dubbed “Liberation Day”.
Now that the penalties are in place,
production is expected to decline and higher prices caused by the tariffs will
likely supress consumption. GDP growth
for the rest of the year is expected to slow and could even turn negative,
raising the possibility of a technical recession.
For the time being, though, first quarter GDP
growth, an increase in unemployment and a bump in inflation give the Bank of
Canada all the reasons it needs to hold off on any further interest rate
moves. Canadians hoping to see a cut may
have to wait until later in the year.
Many market watchers are forecasting at least two more rate cuts in 2025.
The next interest rate setting is scheduled
for June 4.