Canada’s economy did better at the end of 2023 than experts thought it would. This might mean that interest rates won’t be lowered as soon as they were supposed to be.
Statistics Canada said on Wednesday that the economy increased by 0. 2 per cent in November, which is the first growth in six months.
An early guess shows that the total value of goods and services produced in the country went up by 1. 2 percent in the last three months of the year, after going down by about the same amount in the previous three months.
StatCan said the economy will grow by 1. 5%
Those numbers are higher than what the Bank of Canada expected. The central bank thinks the economy will grow by 0. 7% at the end of this year and by 1% next year.
The Canadian economy has been growing more slowly in the past year because people and businesses are having to pay more for borrowing money. This means they are spending and investing less. But it has not had a recession yet.
Douglas Porter, who is the chief economist at the Bank of Montreal, says that the report on Wednesday shows that the economy is doing better than expected. This means that we may need to change our predictions for how the economy will do in 2024 to show that it will be even better than we thought.
If the economy improves this year, the Bank of Canada can wait before lowering interest rates.
“This good result comes after a long time of slow growth. It allows policymakers to slowly stop talking about making things easier, while they wait for inflation to go down,” Porter wrote in a note to clients.
But, economists are looking at Wednesday’s report carefully and still think the economy will not do well in the future.
Statistics Canada gives an idea of what it thinks will happen, but the actual results can be very different.
RBC economist Claire Fan says the report might not be completely accurate.
Additionally, she said that the increase in the real GDP in November was caused by temporary reasons, like a bounce back from factory closures in the manufacturing industry.
She said that it’s not a big change in how much people are buying at the end of 2023.
StatCan said that in November, the economy grew because of increases in industries that make and sell products, like manufacturing and wholesale trade.
At the same time, schools and education services got smaller because of strikes in Quebec.
The Bank of Canada and other experts think the economy will not grow much in the beginning of 2024, but will get better later in the year.
Slower economic growth and less price increases could lead to cuts in interest rates. The people who work in finance think that the interest rate might be lowered in April.
The fan says RBC still expects the central bank to start reducing its main interest rate in June.
“High prices have been making people spend less money. ” She said that things will still be the same and will stay the same because rates will be high in the first half of this year.
At the recent meeting, governor Tiff Macklem said that the governing council is now talking about when to lower interest rates.
The main bank’s basic interest rate is now at five percent, which is the highest it has been since 2001.
source:tigpost.co
