Photo by Reto Fetz
According to data recently released by Statistics Canada, Canada’s economy expanded by 0.5 per cent in January, keeping up the trend from December. The report further stirs speculations that the central bank will increase interest rates later in the year.
Analysts agree that the expansion of the real Gross Domestic Product is fueled by the strength of manufacturing as well as by wholesale trade and transportation. The growth wave was also experienced by finance and insurance companies, together with the construction and real estate sectors. However, mining and oil and gas extraction, as well as retail trade sectors, showed a decrease.
Getting over the hurdle
Favourable figures in the manufacturing sector were based on several segments – mainly on durable and non-durable goods production, as well as on fabricated metal products and motor vehicles and associated parts industries. Some other industries driving the growth in January were the machinery sector and the food, beverage, and tobacco sector.
Douglas Porter, deputy chief economist of BMO Capital Markets, commented on the surprisingly large increases: “There was no mystery to the strength in January, as a surge in auto production powered manufacturing ahead.”
At the same time, Canada’s economy growth forecast for this year (issued by the Conference Board of Canada) was lowered to 2.4 per cent, which is a significant decrease from last year’s expectation of 3.1 per cent expansion. It stated that it is likely that the government will maintain strict fiscal discipline in an effort to stabilize public finances and return to fiscal balance. The state will therefore probably contribute little to the overall economic growth in the upcoming year.
