Canada’s economy expanded at an annualized pace of 2.4 per cent in the first quarter, slightly slower than what economists were expecting.
According to Thomson Reuters, economists had been forecasting the pace of growth to come in closer to 2.9 per cent.
The economy grew by 0.6 per cent in real terms during the first three months of the year, Statistics Canada reported Tuesday.
The quarter ended on a weak note, as the economy shrank by 0.2 per cent in March, after a 0.1 per cent contraction in February. In January, the economy grew by 0.5 per cent.
“A fine quarter ended with a thud, as Canadian GDP got all its momentum from its first month, a signpost of a slowdown ahead,” Avery Shenfeld of CIBC World Markets said in a commentary.
Exports were the largest contributor to real GDP growth in the first quarter, rising 1.7 per cent, following a 0.4 per cent decline in the previous quarter, Statistics Canada said.
Meanwhile, business investment in non-residential structures decreased 3.7 per cent, continuing a downward trend seen over the previous five quarters. Weak investment activity in the oil and gas sector, blamed on lower commodity prices, was a key factor in the decline.
Even before the slower end to the first quarter was confirmed, economists slashed their outlooks for the second quarter, citing the wildfire that hit Fort McMurray and disrupted energy sector production in the area.
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“Growth is expected to remain extremely jagged in the near term as the wildfire pulls down GDP in Q2, before rebounding oil production drives a strong gain in Q3,” said BMO Capital Markets senior economist Robert Kavcic in a note.
TD Bank senior economist Leslie Preston said the expected track of the economy will likely keep the Bank of Canada on the sidelines for a while.
“The underlying fragility of Canada’s economy beneath this see-saw growth pattern will necessitate monetary policy to remain stimulative for quite some time,” Preston said in a commentary. “We don’t expect the Bank of Canada to raise interest rates until 2018 at the earliest, with any further stimulus for the economy to come from fiscal policy.”
In the wake of the report, the Canadian dollar lost 0.34 of a U.S. cent to close at 76.28 cents US.