TORONTO — Canada’s gross domestic product (GDP) remained unchanged in February following a solid .6 percent jump in January.
February’s flat monthly reading belied an acceleration in the annual pace of growth (3.8 percent in the first quarter) with real GDP output up 2.49% compared to a year earlier.
“This was the fastest pace of increase since July 2014 and reflects the recovery in the goods-producing sector,” explained Paul Ferley, assistant chief economist.
Mining production was up 6.4% in line with the recovery in commodity prices, which represents a marked turnaround after two years of decline.
“Growth in service-producing industries was steadier over the last two years though accelerated slightly in February. This broad based strengthening pumped the annual growth in overall GDP higher in February relative to January’s 2.29% pace,” Ferley explained.
This report confirmed that the economy continued to grow faster than the Bank of Canada’s current estimate of potential of 1.3% for the past six months.
“A real GDP output of 2.49 percent provides a strong argument for the central bank to start to withdraw some of the current stimulus in the system,” Ferley said.
“However, recent comments by the Bank of Canada, though acknowledging the recent strength in growth, showed little indication to immediately start to tighten policy. A key restraining factor is concern about potential trade impediments being introduced by the U.S. government dampening both exports and business investment.”
“The Trump Administration’s imposition of tariffs on lumber exports announced earlier this week provide reason for the Bank of Canada to remain wary of this risk,” Ferley concluded.
SOURCE: Royal Bank of Canada press release