Economists react
Canadian GDP rose 0.3% in January, beating the flat consensus and even the highest estimates from economists. One of those was Brain DePratto at TD Securities.
"We were expecting a more muted report, but in the event we got a solid print, front to back," he wrote in a note. "There was great breadth, and it was nice to see construction turn in a positive performance after more than half a year in decline. Perhaps most telling is that absent the curtailment-related drag from the oil and gas sector, January would have been the strongest monthly showing in nearly three years."
One negative was consumer spending which was flat for the second month. Even with that, they moved up their first quarter tracker to +1.1% q/q and they see the BOC on hold for more than a year.
CIBC Research also reacted to today's Canada Q1 GDP report.
"Oil production was the hole in a surprisingly high-calorie doughnut for the Canadian economy in January, as the rest of the economy performed much better than expected. The result was that monthly GDP for January advanced by 0.3%, despite that being the heaviest month for the curtailment of oil production in Alberta. The mining oil and gas sector contracted 3.1%, less than we had factored in, but the goods sector still managed a hefty 0.6% gain, helped by the expected rebound in factory output but an upside surprise in construction (up 1.9% but still down 4.1% yr/yr). Services gained a trend like 0.2%," CIBC notes.
"Overall, a better than expected start to Q1 after a near zero growth rate in Q4, and reason enough for the Bank of Canada to hang on to its hopes that the growth stall late last year will prove temporary. Negative for fixed income, bullish for the Canadian dollar," CIBC adds.
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