Canada: Economy cooled during Q4 but was far from ice cold – CIBC

Data released on Tuesday showed the Canadian economy grew 0.1% in November, with Q4 GDP estimated to have increased at a 1.6% annualized pace. Analysts at CIBC point out that the Canadian economy cooled during the final quarter of last year but was far from ice cold.

Key quotes:

“A 0.1% increase in GDP during November, combined with a marginal upward revision to the prior month and a flat estimated reading for December, resulted in a 1.6% annualized growth rate for the quarter as a whole. While that is a clear deceleration relative to the pace of growth seen earlier in the year, it is still better than most forecasters were anticipating before the quarter began.”

“While the Canadian economy hasn’t cooled as quickly as we (and others) previously expected given the rapid rise in interest rates, there are growing signs of fragility. The recovery in many services has slowed even with activity still well below pre-pandemic levels, and a dip in restaurant activity could be an early sign of consumers changing their behaviour in the face of inflationary pressures and rising interest rates. Because of that we suspect that the economy will stall and possibly even contract modestly in Q1, which will keep the Bank of Canada on the sidelines.”