Canada: Growth softened further in Q1 - NBF

According to Krishen Rangasamy, analyst at National Bank of Canada, despite today’s soft GDP reading, Canadian real GDP remains on track to grow around 2.2% in 2018.

Key Quotes:

“Canada’s GDP expanded at an annualized pace of just 1.3% in the first quarter of 2018. But there were upward revisions to Q2 and Q3 of last year, pushing up slightly the growth print for 2017 as a whole to 3.05% (from 3.00%).”

“The Canadian GDP results were weaker than expected. While consumption spending contributed to real GDP, its growth was the weakest in three years, likely a result of moderation in employment creation which hammered real disposable incomes during Q1. Fading housing wealth effects amidst softening home prices, may also have
weighed on spending.”

“The large drag from trade was due to surging imports, the latter reflecting rising business investment which is a positive for GDP and potential GDP as well. Last but not least, a decent handoff from March ─ real GDP grew 0.3% unannualized in that month ─ warrants optimism for Q2.”

“All in all, Canada’s real GDP remains on track to grow about 2.2% this year, although that assumes employment and consumption spending growth bounce back.”