Small rays of hope brightened Canada’s economic outlook last week
In a Reuters poll conducted early last month, forecasters predicted that Canada’s economy expanded by just 1.6 percent on an annualised basis in the first three months of this year.
But that consensus could prove to be too low, with many now expecting growth to be close to 2 percent or even higher, likely a welcome sign for Stephen Poloz who was named Bank of Canada’s new governor last Thursday and will replace Mark Carney on June 3.
Last Tuesday brought the first bit of good news, with the monthly gross domestic product (GDP) by industry growing at a faster pace than forecast in February, lifted by strength in potash mining, oil and gas and manufacturing.
Another pleasant surprise came on Thursday when the March report card on trade showed surging exports propelled the country to its first trade surplus in a year.
“The implication is that net exports are poised to contribute positively to real GDP growth in Q1 and following a more impressive start to the year for industry GDP, the economy is likely to expand closer to its trend rate around 2 percent,” TD Securities’ Mazen Issa wrote in a note.
TD Securities’ earlier forecast echoed the consensus of the Reuters quarterly poll conducted in April at 1.6 percent.
Similarly, BMO Capital Markets also upgraded its first quarter annualised growth forecast to 2.3 percent after last week’s data releases from 1.5 percent in last month’s poll.
“With better-than-expected growth in February, there is suddenly some upside risk to our (and the Bank of Canada’s) call for 1.5 percent annualised growth in the first quarter,” Douglas Porter, chief economist at BMO wrote in a note after Tuesday’s monthly GDP data released.
Others like RBC, CIBC, NB Financial and Scotiabank also upped their first quarter GDP predictions last week.
“In my opinion, growth is tracking the high 2 percent or maybe even 3 percent,” Scotiabank’s Derek Holt said.
Although the Bank of Canada’s new surprise Governor-appointee, Poloz, has already expressed his concerns about the country’s economic recovery, the few small rays of hope last week could offer him some solace.