OTTAWA—Canada’s economy made a solid start to the new year with growth in the first two months tracking well ahead of the Bank of Canada’s forecast, reinforcing expectations the central bank will once again stick to the sidelines at its coming policy meeting.
The expansion in January was the strongest in a year, bolstered by a recovery with public sector strikes ending in Quebec and backed by increased activity across many segments of the economy. And a flash estimate suggests the strength carried through to last month thanks to increases in areas ranging from natural resources extraction to manufacturing and finance, Statistics Canada said Thursday.
Although inflation in the country has cooled in recent months and slack is building in the labor market, the rebound in industry growth in 2024 suggests no urgency for the Bank of Canada to begin cutting interest rates and economists continue to expect it to leave its policy rate unchanged at next month’s meeting and possibly through the first half of the year.
Gross domestic product, a broad measure of goods and services produced across the economy, rose 0.6% in January GDP from the month before to 2.218 trillion Canadian dollars, the equivalent of $1.635 trillion, Statistics Canada said Thursday. That was stronger than both the consensus forecast of economists and the data agency’s advance estimate, both for 0.4% growth. Compared with a year earlier, GDP by industry in the first month of the year rose 0.9%.
Preliminary data suggest GDP by industry expanded 0.4% month-over-month in February.
“The economy started 2024 with a bang. Broad-based gains suggest that the economy is faring better than expected despite restrictive monetary policy,” said Arlene Kish, director of Canadian economics at S&P Global Market Intelligence, who only expects the first rate cut in Canada in July.