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Canada: Q1 quantity now appears a lot stronger than anticipated – CIBC


Canadian GDP rose at a 1.1% price in February, above the 0.8% anticipated, in keeping with a report launched on Friday. Analysts at CIBC, level out that the Financial institution of Canada now has much more ammunition to justify a non-standard 50 bp rate of interest hike on the subsequent assembly, and certain the one thereafter.

Key Quotes: 

“After hitting the quick lane in February, advance information suggests progress eased to a steadier tempo in March. The 1.1% achieve in February was even bigger than the consensus and advance estimate (+0.8%), and was adopted by a steadier, however nonetheless stable, 0.5% achieve in March. This places Q1 as an entire on monitor for a 5.6% annualized progress price, nicely above the three% forecast contained inside the Financial institution of Canada’s newest MPR.”

“The Canadian financial system continues to shock and the Q1 quantity now appears a lot stronger than anticipated. This is able to put our annual forecast at round 4%, all else equal, just a few ticks greater than our final projection. Nonetheless, we’ve seen occasionally massive gaps between these month-to-month information on GDP by business information and the next quarterly GDP figures, that are measured by the sources of expenditures, most notably in Q2 2021. We proceed to count on a deceleration in progress over the steadiness of the yr as impression of excessive inflation and price hikes put a squeeze on Canadians’ spending energy and gradual the housing market.”

“With one other sturdy launch in hand, the Financial institution has much more ammunition to justify a non-standard 50 bp rate of interest hike on the subsequent assembly, and certain the one thereafter. Nonetheless, with progress prone to gradual within the second half of the yr and inflation poised to decelerate, we nonetheless assume that the trail greater for rates of interest gained’t be as steep as monetary markets are presently anticipating, and we nonetheless see a peak of two.5% reached in early 2023.”

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