Canada’s economy grew modestly in the first quarter of this year

Spending by Canadian households helped the economy grow at an annualized rate of 1.7% in the first three months of the year, Statistics Canada said Friday, May 31.

The agency also revised its reading for growth in the fourth quarter of 2023 down to an annualized rate of 0.1%, compared with its initial report of an annualized rate of 1%.

Growth in the first quarter was powered by higher household spending, which increased 0.7%.

Household spending on services rose 1.1%, boosted by spending on telecommunications services, rent and air travel, while household spending on goods gained 0.3% in the first quarter, helped higher by spending on new trucks, vans and sport utility vehicles.

Statistics Canada also said household final consumption spending on a per capita basis edged up 0.1% in the first quarter, after falling for three consecutive quarters.

The results for the first quarter came as Statistics Canada said real gross domestic product was essentially unchanged in March, following growth of 0.2% in February.

The March figure came as the construction industry gained 1.1% for the month, its strongest growth rate since January 2022. Meanwhile, the manufacturing sector fell 0.8%, weighed down by retooling work at multiple automotive assembly plants in Ontario.

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The agency said its preliminary estimate for the economy in April points to growth of 0.3% as increases in manufacturing, mining, quarrying, and oil and gas extraction and wholesale trade were partially offset by decreases in utilities.

The reading of the economy comes ahead of the Bank of Canada’s interest rate decision set for next week.

Bank of Canada governor Tiff Macklem has said a rate cut is within the realm of possibilities, but that the decision will be driven by the economic data.

He has said the central bank is seeing the right conditions to begin lowering its policy rate from five %, but that he wants to see those conditions sustained to ensure inflation is heading down to the bank's two % target.

The annual inflation rate fell to 2.7% in April compared with 2.9% in March.

This report by The Canadian Press was first published May 31, 2024.