Whoa! Suddenly Canada’s economy is looking not so shabby. Here’s what the economists say

Canada’s GDP racked up 0.6 per cent development in January, beating expectations and earning rave reviews from economists.

“Roaring start,” “most encouraging in recent memory”, “impressively rapid progress” and “flying start” were some of comments around the broad-based growth that’s the strongest since July 2013.

It’s not great news for anyone dreaming about an interest rate cut when the Bank of Canada meets in April, but economists continue to be pretty dovish around the bank’s next move. Despite the pickup throughout the economy, some aren’t expecting any pursuit on rates until well into 2017.

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Here’s exactly what the economists are saying about Canada’s GDP growth:

Douglas Porter, chief economist, BMO Economics

Canadian real GDP rose with a whopping 0.6% in January, double consensus expectations of the solid 0.3% advance and also the biggest monthly gain in almost 5 years. Moreover, the huge gain follows decent development in the 2 prior months, therefore it is not really a fluky rebound-type bounce, and also the gains were spread across many industries and sectors, so it’s not as a result of special factor. Suddenly, the Canadian economy has managed to post a rip-roaring annualized growth rate of 5% in the last three months (and who could have believed captured that the phrases “Canadian economy” and “rip-roaring” could be observed in exactly the same sentence?).
Today’s release changes everything- well, a minimum of it changes the tone from the debate around the Canadian near-term outlook. Analysts have been quietly marking up their forecasts in recent weeks around the surprisingly robust export data round the turn of the season, as well as on resilient consumers and housing markets. Today’s blow-out result only will accelerate and accentuate that trend. With fiscal stimulus hurtling on the pike, suddenly 2% GDP growth for this year looks do-able, even with the drag from ongoing resource sector cutbacks. For the reason that environment, the Bank of Canada is officially on ice, and also the Canadian dollar no more looks overdone at around 77 cents.

Nick Exarhos, CIBC Economics

Last year would be a rough one for the Canadian economy, but 2016 is off and away to a roaring start. January monthly GDP increased by 0.6%, even stronger than our above-consensus 0.4% call. The surge in export volumes, and also the advance report on manufacturing, had us searching for a solid contribution from factory output. Plus they delivered, as manufacturing added 2 ticks towards the overall GDP tally. The monthly grow in January presently has us looking for a Q1 growth pace in the order of two.5% to 3%, even accounting some give back in February.

Brian DePratto, TD Economics

Today’s monthly GDP report is perhaps the most encouraging in recent memory. Strength was broad-based, with almost all major industries growing in January. Indeed, many strong monthly growth figures in recent history were the result of one off factors, or snap-backs following contractions. In contrast, January’s strong performance follows three prior months of expansion, with special factors playing an inferior role.

The brighter near-term outlook will probably be reflected in the Bank of Canada’s next Monetary Policy Report, to become published on April 13th. – Despite the more positive outlook, we don’t expect any policy rate of interest action in the Bank of Canada until well into 2017. Using the Canadian growth rotation just getting underway and long-term inflationary pressures appearing muted, the financial institution of Canada will likely want to keep its foot around the accelerator provided possible to support the rotation process.



Derek Holt, Vice President, Scotiabank Economics




Wow. A word about covers the way the economy entered 2016. This is actually the strongest monthly growth reading since July 2013. It leaves Q1 growth tracking at 3.7%% q/q in an annualized and seasonally adjusted pace assuming flat readings in February and March in order to focus upon the effects of the items we know through the Q4 hand-off and the January reading. The economy is in fine shape overall. It has grown for four consecutive months after a dip in September that was partly attributable to temporary production disruptions, and it has grown for six of the past seven months following very mild contractions over 2015H1. Recession this isn’t and not by any yardstick.

Bill Adams, senior international economist at PNC Financial Services Group

Canadian real GDP surprised towards the upside in January, echoing upbeat data in the United States’ other oil-dependent neighbour, Mexico. The Canadian economy is making impressively rapid progress in transitioning to growth led by non-resource sectors. These data support our call the Bank of Canada’s next move is much more likely a rate hike than a cut.

Krishen Rangasamy, Senior Economist National Bank

Canada had a flying begin to 2016 as momentum from late last year carried over to this season. Even more encouraging is always that gains were broad-based with only a number of sectors seeing small declines in output. The products sector got an expected lift from the manufacturing sector (thanks to better exports) and the return of cooler temperatures which lifted utilities output. Sinking oil prices