Canada’s economy stalled at the end of 2022 with zero growth, the government statistical agency said Tuesday, coming in below analysts’ expectations.
In the last three months of 2022, according to Statistics Canada, business spending on machinery and equipment fell, household spending rose slightly, exports edged up while imports declined, and housing prices fell — coinciding with higher borrowing costs.
Economists had expected growth of up to 1.6 percent, while the Bank of Canada had forecast gross domestic product (GDP) of 1.3 percent.
Desjardins analyst Royce Mendes said, however, that the data was not as bad as it appeared at a glance, noting that final domestic demand — seen as a better gauge of economic momentum — had still risen slightly from the previous quarter.
That figure, he said in a research note, “was only slightly below our forecast and reveals that the headline miss was a story of volatile inventories and a drag from international trade.”
He also noted that an estimate of growth in January “suggests there’s still a chance that the economy could expand in the first quarter (2023) at double the 0.5 percent annualized rate the Bank of Canada had projected.”
As such, he suggested the central bank would continue to hold its key lending rate at 4.5 percent, after announcing a pause in its aggressive monetary policy in a bid to tame inflation.
“However, the data won’t be enough to see rate hike bets for later in the year evaporate just yet,” he added.
