Tuesday, May 28, 2019 - 05:10

MNI DATA PREVIEW: 1Q Canada GDP May Ward Off Rate Cut Bets

By Greg Quinn

OTTAWA (MNI) - Canada's economy probably grew fast enough in the first quarter to push back the need for talk of lower interest rates from the central bank.

Gross domestic product expanded at a 0.8% annualized pace between January and March, according to economists surveyed by MNI. That would be faster than the Bank of Canada's April estimate of 0.3%, and the fourth-quarter reading of 0.4%, giving policy makers reason to see the economy as regaining momentum.

Investors will scan the report for clues to the second quarter, when growth is poised to pick up further on record job creation and signs that housing markets and oil exports have stabilized. Key areas to watch include whether indebted consumers are curbing spending and whether exports are weighed down by U.S. trade tensions and volatile oil prices.

But, while growth of almost 1% is a perfect formula for a central bank that has shifted to avoid making strong signals about the future direction of interest rates, Bank of Canada Governor Stephen Poloz probably needs to see a much longer period of solid expansion before being able to say the economy has returned to full strength.

Some investors are betting Canada will cut interest rates later this year, in part because other central banks have turned dovish. Rising trade protectionism in recent months has fueled concerns about global growth, and Canada is heavily reliant on international trade.

Canada's GDP data is due at 8:30am EST on Friday, after the BOC's interest-rate decision Wednesday and a speech by Senior Deputy Governor Carolyn Wilkins Thursday in the oil hub of Calgary.

The first quarter also ended on a more positive note. GDP for the month of March is expected to rise 0.4%, a rebound from a 0.1% contraction in February.

--MNI Ottawa Bureau; +1 613-314-9647; email:

[TOPICS: M$C$$$]

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