This morning, Stats Canada released the first quarter GDP figures indicating a slowdown in growth in the first quarter to a 1.3% annual rate compared to 1.7% in the final quarter of last year. This was precisely what the Bank of Canada (BoC) forecast for Q1 in the April Monetary Policy Report (MPR).
Yesterday, the BoC told us in its press release that the first quarter’s growth exceeded their expectations. Most economists were expecting first-quarter growth to come in at 1.8%, and so was the BoC. Only goes to show that not even the central bank has a crystal ball.
Growth was dampened by a deceleration in household spending, lower exports of non-energy products and a decline in housing investment. Consumer spending decelerated for the third consecutive quarter–rising by 1.1% in Q1 compared to 2.2% last quarter. The growth in consumption peaked in the first quarter of last year at a robust 4.0% annual rate. Household spending growth has decelerated to its slowest pace in three years. Consumer spending on goods such as automobiles stalled after almost three years of gains.
Growth in business spending on capital projects slowed to 3.5% from 9.7% in the final period of last year, and foreign trade was a drag on growth as exports climbed less than imports.
The most significant decline was in housing. Investment in housing fell 7.2%, the most since 2009, on a whopping 13.5% plunge in ownership transfer costs such as real estate and mortgage broker commissions (see chart). That reflected new mortgage stress test measures that began in January, Statistics Canada said. |