Well, on Good Friday, how could I not delight you, friends, with something nice about Canada... For example, forecasts by BMO's chief economist.
Data from Statistics Canada (Stat Can) shows that the real Gross Domestic Product (GDP) sharply rose in January, exceeding analysts' expectations. In just two months, the growth in 2024 has already equaled the entire growth observed in 2023. However, it is still unclear how this momentum will continue, as much of the growth was driven by the public sector.
Canada's economy is growing much faster than analysts had anticipated. The real GDP increased by 0.6% in January, which is 50% more than the preliminary data from the previous month had suggested. The agency's preliminary data estimates a growth of 0.4% in February. It might be difficult to assess how significant this was without context, but it's a huge growth. "To put this two-month growth spurt into perspective, the total increase of 1.0% is as much as the economy grew for the entire year of 2023," explained Douglas Porter, BMO's chief economist.
If the current data holds, real GDP forecasts will require significant upward revisions. If February is confirmed and March remains unchanged, then the annual growth would be at a level of 3.5% for the first quarter. This could make Canada the fastest-growing economy in the G7.
But, as they say - the devil is in the details. The thing is that January's growth was driven by the public sector (+1.9%), which accounted for 0.4 percentage points out of the 0.6 percentage points of growth. This segment includes education, healthcare, social assistance, and public administration. The end of a strike in Quebec's public sector was the main reason for the growth in January, highlighting the slowdown it caused in the previous two months.
The second largest factor of growth was manufacturing (+0.9%) in January. Stat Can largely attributes this to the production of transportation equipment.
On the other hand, temporary factors also put pressure on the decline of the real GDP. The largest decrease was recorded in the mining, quarrying, and oil and gas extraction sector (-1.9%) following a record growth in December.
The larger-than-expected growth of Canada's economy will likely elicit mixed reactions from the Bank of Canada (BoC). The growth is significantly above their forecast, which relieves them of the pressure to hastily lower interest rates. At the same time, they might view this growth as "transitory" and this time they might be right.
"The surprisingly good start to 2024 might make the Bank of Canada a bit worried about the inflation outlook. Our forecast (the Bank of Montreal's forecast) for rate cuts in June still depends on upcoming CPI reports, but if this activity is at least partially repeated in the second quarter, the Bank of Canada will see much less urgency in lowering rates anytime soon," Porter explained.
We'll live and see... 
And for all questions related to real estate in Toronto and the GTA - come to me, come to me... 905-909-8888 or DM me.