Growth slows in Canada as rate hikes start to bite - Q4 2022 annualized growth down to 1.6%
The economy is "just managing to keep its head above water." The economy has not yet absorbed the impact of past rate hikes.
Canada's economy slowed down at the end of 2022, growing at half the pace of the third quarter.
Gross domestic product was flat in December, with growth in retail, utilities, and the public sector offset by decreases in wholesale, finance, and oil and gas industries.
Annualized growth in the fourth quarter of 2022 was estimated at 1.6%, down from 2.9% in the third quarter.
Higher interest rates (jumped 425 basis points since last March) are slowing economic activity and impacting consumption.
Bank of Canada’s aggressive tightening campaign is expected to halt growth in 2023.
The Bank of Canada plans to hold the benchmark overnight lending rate at 4.5% if growth and inflation evolve as expected.
The services-producing industries had growth partially offset by a decline in the goods sectors.
Interest-rate increases are dampening activity for real estate agents, residential building construction, and legal services.
The construction sector dropped 0.7%, with accommodation and food services contracting 1.4%.
The retail trade decreased 0.6%, with the food and beverage subsector falling to its lowest level since April 2018.
The Bank of Canada expected fourth-quarter growth of 1.3% while economists predicted a gain of 0.9%.
Canada's economy expanded 3.8% in 2022, broadly in line with the Bank of Canada's estimate for a 3.6% growth.
“Even though today’s growth numbers are holding up well, the BoC can feel comfortable keeping its policy on cruise control a little while longer.”
See the full story here: https://www.bnnbloomberg.ca/q4-economic-growth-slows-to-1-6-as-aggressive-hikes-bite-1.1877179
