Canada’s gross domestic product (GDP) expanded by 3.1% from a year ago in this year’s first
quarter as domestic demand offset a decline in exports.
The expansion was less than the 5.2% consensus expectation of economists, and weaker than
preliminary data from Statistics Canada suggested. It was also down from a revised 6.6%
annualized growth rate in the final three months of last year.
However, the first-quarter GDP data is in line with Bank of Canada forecasts and is unlikely to
change the trajectory of interest rate increases. Markets expect a second 50 basis point
increase this week as the central bank moves to lower inflation from three-decade highs.
Exports in Q1 fell by an annualized 9.4%, in part due to a series of production disruptions in
Canada’s oil sector that included COVID-19 shutdowns, cold weather, and planned
maintenance.
However, the decline in exports was offset by domestic demand that accelerated to 4.8% on an
annualized basis, up from 3.7% in the fourth quarter on the back of stronger consumption and
investment in housing and other economic sectors.
The numbers suggest households and businesses continued to spend despite restrictions
meant to contain the spread of the Omicron variant of COVID-19, and rebounded quickly as
authorities eased lockdowns starting in March.
On a monthly basis, GDP rose for a 10th consecutive time in March, increasing by a stronger-
than-expected 0.7%. The expansion slowed in April, with Statistics Canada reporting a
preliminary estimate of 0.2% growth for the month.
Most components of domestic demand sped up in the first quarter. Consumption grew at an
annualized pace of 2.9% at the start of the year, up from 2% in the fourth quarter.
Household spending was helped by a jump in worker compensation, which was up 3.8% on a
non-annualized basis thanks to “significant” wage growth, the statistics agency said. That was
the fastest pace of growth since 1981.
While oil volumes fell in the first quarter, Canada’s economy still generated more receipts from
the sector thanks to higher prices. Growth in nominal output rose 3.7% on a non-annualized
basis due to higher wages and profits.
Investment in housing jumped to an annualized 18.1% in the first three months of this year, up
from 12.4% in the fourth quarter. Spending in non-residential investment slowed slightly but
remained at a robust 9% annualized growth.?
