OTTAWA (Reuters) – Canada’s Gross Domestic Product grew by 0.4% on a monthly basis in January as economic activity continued the momentum of the last few of months, data showed on Friday.
Canada’s economic activity has grown at a brisk pace in the last two quarters registering an annualized growth of well over 2%, indicating that seven rounds of interest rate cuts had helped boost consumer spending and investment.
But the Bank of Canada has warned that there was a significant gap between the robust hard data seen so far and survey data of businesses and consumers.
With U.S. tariffs coming on a wide range of products and retaliatory tariffs from Canada, spending and investments could considerably dip, hurting economic growth, the BoC and economists have said.
Analysts polled by Reuters had estimated the January growth to be at 0.3%, from an upwardly revised 0.3% growth in December. A flash estimate from Statscan showed growth in February was likely to be unchanged.
The flat February growth was probably due to the offseting impacts of growth in manufacturing, finance and insurance and contraction in real estate rental, leasing, oil and gas extraction and retail trade, Statscan said.
January’s economic activity was boosted by both goods and services sector with expansion seen in 13 out of 20 sectors, the statistics agency said, with goods-producing industries growing by 1.1%, its largest growth since October 2021.
The mining, quarrying, and oil and gas extraction and manufacturing sectors were the largest contributors to growth. Oil and gas extraction subsector registered the biggest growth amongst them with 2.6% expansion in January.
The manufacturing sector was up 0.8% in January, after contracting for two consecutive months and construction activity continued to expand in January led by residential construction which hit a peak since November 2023.
Retail trade was the only major dampener for January. Data showed.
U.S. President Donald Trump has imposed 25% tariffs on steel and aluminum earlier this month and on Wednesday slapped 25% tariffs on auto parts and car imports. He has vowed more import duties from next month.
This is likely to wipe off almost all growth projected by the central bank, BoC has said. It had forecast 2025 growth at 1.8%.
Currency swap markets are seeing 62% chance of a pause in rate cuts on April 16 after the BoC slashed rates by 225 basis points to 2.75% in a space of nine months.
Statscan said that exports to the U.S. accounted for 16.8% of Canada’s GDP and over 2.6 million local jobs.
(Reporting by Promit Mukherjee; Editing by Dale Smith)
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