The recent GDP numbers from Canada showed that the nation’s gross domestic product expanded for a seventh consecutive month in August. This marked the longest stretch of economic expansion in more than a year. Despite the increase in the GDP, many see that the BoC is not yet under pressure to hasten the pace of rate hikes.
Data released from Statistics Canada last week showed that Canada’s GDP rose 0.1% in August compared to the month before. The median estimates pointed to a no change print from July.
The monthly gain in GDP comes marking a seven months expansion streak. The last time Canada enjoyed an uninterrupted pace of GDP growth was for nine months between the periods of November 2016 through July 2017.
Looking ahead, despite a flat print in GDP for September, Canada’s annualized GDP growth rate is expected to average 1.8%. This matches the Bank of Canada’s forecast on GDP growth. The central bank had raised interest rates just the week before.
It marked the fifth rate hike since July 2017 when the central bank started to hike interest rates. The BoC, in its statement, signaled that more rate hikes would be needed to ensure that the economy does not overheat as the economy was seen operating near full capacity.
Canada’s unemployment rate was seen falling close to a 40 year low. The next BoC meeting is due in December where interest rates are most likely to be hiked once again.
The near 2.0% GDP growth means that the central bank is expected to continue with its current rate hike plans. The long patch of economic growth is however not expected to change the BoC to start hiking rates at a faster pace.
Expectations for a December rate hike have currently moved up to 33.88%.
The GDP data showed that Canada’s oil and gas extraction industry contributed to the overall GDP as economic activity increased by 1.9% in the sector. This comes as the total crude oil output in the province of Alberta hit a record high.
Coming in at a close second was the financial and insurance sector which rose 1.0% on the month.
However, on the flipside, the manufacturing sector posted a contraction. The sector fell 0.6% during the month. The decline came due to a 1.9% decline in motor vehicle assembly due to a shutdown of the auto plants.
The GDP data showed that 12 out of the 20 industrial sectors had posted a decline.
Canada’s producer prices edge higher
In a separate report, data showed that Canada’s producer prices index rose 0.1% in September on a month over month basis. The increase was driven by higher prices for chemicals and energy and petroleum productions.
The data beat estimates which expected to see no change to the producer prices index. Price of raw materials fell 0.9% due to smaller demand for conventional fuels.
Canada’s unemployment rate falls to 5.8%
Later, on Friday, the monthly jobs report showed that Canada’s unemployment rate fell to 5.8%. This came amid forecasts that the unemployment rate would remain steady at 5.9%. The monthly jobs added in the economy was seen at 11,2000. This was below estimates, but the numbers for October showed that the economy added 206,000 jobs in the year. The increase in the jobs numbers pushed the unemployment rate lower. This came amid reports that over 18,000 people had left the workforce voluntarily.
The economy was seen adding 34,000 full-time jobs but was offset by a decline of 22,600 in part-time positions during the period.