Abipa Canada Factory
Key Points
- Canada's economy likely grew by 0.3% in December, avoiding a technical recession.
- Preliminary estimate suggests annualized growth of 1.2% in Q4, surpassing Bank of Canada's zero growth forecast.
- Central bank considers reducing 22-year-high interest rates amid signs of economic rebound.
Recent data indicates that Canada's economy demonstrated resilience, with a likely growth of 0.3% in December, following a more-than-expected expansion in November. This positive trend suggests a rebound in the final quarter, prompting discussions within the central bank about the potential reduction of 22-year-high interest rates.
According to a preliminary estimate by Statistics Canada, the anticipated growth in December would result in annualized growth of 1.2% for the fourth quarter. Notably, the economy experienced a contraction of 1.1% in the third quarter, potentially averting a technical recession, defined as two consecutive quarters of contraction, in the latter half of the previous year.
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Statscan reported a 0.2% expansion in November compared to the previous month, surpassing analysts' forecast of 0.1%. This growth marked a significant turnaround after five months of either contraction or stagnation.
"The Canadian economy apparently rose from the dead late last year," commented Royce Mendes, head of macro strategy for Desjardins Group.
If the December estimate holds true, the economy's performance will outpace the Bank of Canada's forecast from last week, which predicted zero growth in the fourth quarter. Despite these positive indicators, BoC Governor Tiff Macklem has expressed confidence that the economy will avoid slipping into a recession.
The central bank, maintaining its overnight rate at 5% for the last five months, is shifting its focus to contemplating the timing of potential reductions in borrowing costs, signaling a nuanced approach to monetary policy.
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