Canada’s economy rocketed in February as pandemic-related restrictions eased, fueling economists’ expectations that the Bank of Canada will opt for another outrageous rate hike in June.
Statistics Canada said Friday that real gross domestic product rose 1.1 percent in February, the largest monthly increase since March 2021.
The result was the ninth straight monthly gain, surpassing the agency’s initial estimate for the month, which predicted a 0.8 percent increase for the month.
The agency’s early estimate for March this year pointed to a 0.5 percent gain for the month. The official figure is expected on May 31.
“With all the talk of how high inflation and rising interest rates will slow growth, today’s GDP report reinforces the view that momentum in the Canadian economy is relentless,” TD Bank economist James Orlando wrote in a report.
“The Bank of Canada no longer needs to be convinced that another 50 basis point increase is needed at its June 1 meeting.”
The central bank raised its main interest rate target by half a percentage point for the first time in more than 20 years earlier this month to bring it down to one percent and warned more rate hikes are on the way as it helps keep inflation under control.
Governor Tiff Macklem this week told a House of Commons committee that the bank will “consider taking another 50 basis point step” as it looks ahead to its next decisions.
RBC economist Claire Fan said, based on February’s reading and early estimates for March, that the economy grew about 5.5 percent year-on-year in the first quarter.
“That’s higher than our current forecast of 3.5 percent and well above the 1.4 percent year-on-year contraction in the same quarter for US GDP reported earlier this week,” Fan wrote in a report.
“But capacity issues are becoming more pressing for both economies. Labor shortages are exceptionally acute, and that applies even in close contact with sectors that have not yet fully recovered.”
Statistics Canada said 16 of the 20 industrial sectors grew in February, with service-producing industries growing 0.9 percent while goods-producing industries grew 1.5 percent.
The lodging and food services sector rose 15.1 percent in February as pandemic-related restrictions introduced in December and January were eased.
Transportation and warehousing were up 3.1 percent, while the arts, entertainment and recreation sector grew 8.4 percent this month.
The construction sector climbed 2.7 percent in February.
This report from The Canadian Press was first published on April 29, 2022.