Canadian economy misses first quarter growth forecast
TORONTO (Reuters) -The Canadian economy expanded at an annualized rate of 1.7% in the first quarter, missing forecasts, and real gross domestic product likely rose 0.3% on a monthly basis in April, data showed on Friday.
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ANDREW KELVIN, HEAD OF CANADIAN and GLOBAL RATES STRATEGY AT TD SECURITIES
"I think this data makes the June rate cut more likely... there are good reasons for the Bank of Canada to exercise caution around the GDP (growth) rate, wage growth and inflation expectations, but if the Bank of Canada would like to cut rates, the data supports that."
"There is an interesting philosophical argument to be made that you can always wait for another data point and wait for another to validate, but the Bank of Canada needs to strike a balancing act here. So I would say that with four consecutive quarters of GDP growth below 2%, I would argue that the Bank of Canada has seen enough data to observe a trend. I don't think people would have a hard time with that."
KATHERINE JUDGE, SENIOR ECONOMIST, CIBC CAPITAL MARKETS
"In the first quarter, final domestic demand rebounded to 2.9%, with consumption driving the bulk of the growth and adding to increases in business investment and residential structures. However, the monthly GDP figures showed that momentum faded as the quarter progressed, with activity at the turn of the year supported by the end of strikes and milder than normal winter weather."
"The March GDP print showed no growth as expected, while April showed a rebound to 0.3%, which will include an increase from the resumption of activity at auto plants following retooling shutdowns. The Bank of Canada remains on track to cut interest rates in June given the cooling seen in inflation and the fading of momentum in GDP over the quarter."
SIMON HARVEY, HEAD OF FX ANALYSIS FOR MONEX EUROPE AND MONEX CANADA
"Today's Q1 GDP report has just killed the economic reacceleration argument in favour of the Bank of Canada holding rates next week. Not only has first quarter growth undershot the BoC's forecasts of both actual and potential growth, but it has done so against a much weaker base as Q4 GDP was revised significantly lower."
"Signs of cyclical weakness have been evident across all Canadian data since the turn of the year, and more specifically since April's BoC meeting, which should lead the BoC to not only cut rates next week but once again in July. Failure to do so risks them keeping policy overly restrictive and having to embark on a much more aggressive easing cycle into year-end."
DOUG PORTER, CHIEF ECONOMIST, BMO CAPITAL MARKETS
"It's the usual jumble of mixed messages but I would say overall it mostly came down on the light side. Obviously, what was most notable here was the slightly lower than expected first quarter result and the big downward revision to the fourth quarter as well, which definitely suggests that activity was a bit lighter than most had expected around the turn of the year."
"That sluggish news was somewhat countered by the initial estimate for April that does suggest the economy righted the ship a bit in the spring."
"While there are a lot of mixed messages here, I think overall they'll (the Bank of Canada) take away from this that the economy is really struggling to grow and I think at the margin it slightly increases the chances of them cutting rates next week."
(Reporting by Fergal Smith and Divya Rajagopal; Editing by Fergal Smith and Chizu Nomiyama)
