(Ottawa) Growth in the Canadian economy was slower than expected in the first quarter, strengthening the case for a possible interest rate cut by the Bank of Canada next week.
Statistics Canada announced Friday that Canadian household spending helped the economy grow at an annual rate of 1.7% during the first three months of the year.
The agency also revised its growth figures for the fourth quarter of 2023 to an annual rate of 0.1%, from its initial estimate of an annual rate of 1%.
Growth in the first quarter was driven by higher household spending, which rose by 0.7%.
Household spending on services rose by 1.1%, supported by spending on communications, rent, and air travel, while household spending on goods rose by 0.3% in the first quarter, supported by increased spending on new trucks, vans, and sport utility vehicles.
Statistics Canada also reported that household final consumption spending, measured per capita, rose slightly by 0.1% in the first quarter, after declining for three straight quarters.
The first-quarter results came as Statistics Canada said real gross domestic product remained essentially unchanged in March, after 0.2% growth in February.
In March, the construction sector rose 1.1%, the strongest growth rate since January 2022. Meanwhile, the manufacturing sector fell 0.8%, dragged down by retooling work at several Ontario auto assembly plants.
The agency said its preliminary estimates for the April economy show growth of 0.3%, with increases in manufacturing, mining, quarrying, oil and gas extraction and wholesale trade partially offset by declines in public services.
The economic reading comes before the Bank of Canada's interest rate decision scheduled for next week.
Bank of Canada Governor Tiff Macklem said a rate cut is possible, but the decision will be driven by economic data.
He said that the central bank saw that the conditions were appropriate to begin reducing the interest rate by 5%, but it wanted these conditions to be sustainable to ensure that inflation moved towards the bank’s target of 2%.
Annual inflation fell to 2.7% in April, compared to 2.9% in March.
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