Canadian GDP rises in January: Statistics Canada

March 28, 2024 Mario Toneguzzi BusinessNews

Real gross domestic product (GDP) grew 0.6% in January. Services-producing industries increased 0.7% in January, led by a rebound in educational services following the resolution of the public sector strikes in Quebec in November and December. Goods-producing industries were up 0.2% in January 2024 with the utilities and manufacturing sectors rebounding from declines in the previous month. Overall, there was broad-based growth with 18 of 20 sectors increasing in January, reported Statistics Canada on Thursday.

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“Durable goods manufacturing (+0.9%) contributed the most to the increase in January and was largely a result of an increase in the transportation equipment manufacturing subsector (+3.0%). Following four consecutive monthly declines, the motor vehicle manufacturing industry increased 4.9% in January, as production resumed at some auto assembly plants following retooling-induced partial shutdowns in the previous months. Motor vehicle parts (+3.5%) rebounded as well in January, following a 3.7% drop in December. Non-durable goods manufacturing increased 1.0% in January as five of nine subsectors expanded,” said the federal agency.

“Following three consecutive monthly increases, the mining, quarrying and oil and gas extraction sector declined 1.9% in January, as two of three subsectors contracted. Oil and gas extraction dropped 4.4% in January, after reaching a record high level the month prior. Production declined as frigid temperatures impacted the Prairies during parts of January. Oil sands extraction decreased 5.2% in January, the largest monthly contraction since August 2020 (-7.7%), as production of synthetic crude along with crude bitumen extraction in Alberta dropped in January 2024. Oil and gas extraction (except oil sands) contracted 3.6% in January, as lower crude oil extraction in Alberta along with lower production coming from Canada’s North Atlantic coast contributed to the decline.

“Pipeline transportation decreased 1.8% in January, its largest contraction since May 2023. Crude oil and other pipeline transportation was down 4.4% in January 2024 as exports to the United States contracted in the month. Pipeline transportation of natural gas was up 0.8%, despite a decrease in storage and exports. Natural gas distribution, particularly to residential consumers, rose in January, as increased demand for heating purposes in parts of the country contributed to the increase. Mining and quarrying (except oil and gas) declined 0.7% in January after three consecutive months of growth. Coal mining (-14.4%) contributed the most to the decline, with its largest monthly contraction since March 2022. Declines in January 2024 were largely concentrated in mines located in Nova Scotia and Alberta due to factors such as reclamation and a shift from coal to natural gas as input to an electricity generation plant.”

StatsCan said advance information indicates that real GDP rose 0.4% in February. Broad-based increases, with main contributions from mining, quarrying, and oil and gas extraction, manufacturing, and finance and insurance, were partially offset by decreases in utilities. Owing to its preliminary nature, this estimate will be updated on April 30, 2024, with the release of the official GDP by industry data for February, it said.
Andrew Grantham, Senior Economist, CIBC Capital Markets, said the Canadian economy appears to be enjoying a strong start to 2024, and even though January’s growth was flattered by a rebound in the public sector following strike activity in Quebec, solid momentum appears to have extended to February as well.
“The 0.6% increase in January GDP was two ticks above the advance estimate and consensus expectation, albeit coming off a slightly downwardly revised -0.1% print for the prior month. Roughly two-thirds of the growth in January was driven by a rebound in the public sector, although there were positive contributions from a number of other areas as well including manufacturing, utilities and real estate. The more surprising news today was the advance estimate for February, which pointed to a further solid 0.4% increase in activity, suggesting that (excluding the public sector rebound from January’s growth rate) underlying momentum actually accelerated further in that month,” he said.
“The strong January and February figures mean that Q1 growth as a whole is now tracking well above the Bank of Canada’s January MPR forecast (3.5% vs 0.5%), which clearly suggests there is no urgency for an immediate reduction in interest rates. However, with inflation also undershooting the Bank’s prior expectations at the same time, it appears that much of the growth we are seeing is coming from an easing of supply constraints rather than necessarily a pick-up in underlying demand, and as a result we still see scope for a gradual reduction in interest rates starting in June.”
Douglas Porter, Chief Economist, BMO Economics, said: “The surprisingly healthy start to 2024 points to above-potential growth in Q1, which could make the BoC a bit less comfortable with the inflation outlook. Our call for a June rate cut still hinges on the coming CPI reports, but if this strength in activity is close to replicated into Q2, the BoC will see much less urgency to cut rates any time soon.”
Marc Ercolao, Economist, TD Economics, said January’s GDP print surprised to the upside against expectations that the economy would advance at a more modest pace.
“Importantly, if the expected carry forward of growth into February is realized, this would put growth in both months as the strongest since January 2023. With today’s print and next month’s guidance, first-quarter GDP is tracking well above potential growth and significantly higher than the Bank of Canada’s current forecast of 0.5% quarter-on-quarter annualized,” he said.”Make no mistake, these growth figures are robust, and presents a more difficult challenge for the BoC. Over the past two months, the Bank has received solid evidence that inflation is cooperating, but strong GDP data prints like today’s will keep them on their toes. Market pricing is still hopeful of a first interest rate cut happening in June, though we think a July cut is more likely. Excluding the education sector rebound, growth in January still presented a solid 0.3% m/m gain, while a seasonally warm winter may be contributing to the heating up of economic activity.”

Mario Toneguzzi

Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.

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