September 28, 2023
Economists expect little or no growth to be reported when Statistics Canada releases July’s GDP numbers on Friday, but some of them see a silver lining: the figures might help forestall any increase in interest rates. Friday’s announcement, along with upcoming inflation and labour market data, will help inform the Bank of Canada’s next interest-rate decision on Oct. 25, which many economists expect to be a close call.
Robert Kavcic, director and senior economist at the Bank of Montreal, said he believes that the economy may have already shown enough signs of slowing for the Bank of Canada to stay put next month. “If we see a weaker print for growth, I think that’s going to confirm to them that there is some underlying weakness starting to build in the economy, and that all of the rate hikes they’ve already put into the system are in fact working,” he said in an interview.
The experts don’t foresee that Friday’s growth figure will be much different the one offered earlier this month, when Statistics Canada used preliminary data to estimate that GDP in July remained unchanged, following a contraction of 0.2 per cent in June. The agency said that while economic activity ticked higher in sectors such as finance and insurance services, industries such as manufacturing, transportation and warehousing, and construction saw declines.
Royce Mendes, managing director and head of macro strategy at Desjardins Capital Markets, said he didn’t expect the GDP number to be “enough to tilt the decision one way or another. If it comes in line with expectations, then it’ll reinforce the view that the central bank will probably stay on the sidelines, but there’s a lot of data to come out between now and the announcement date in late October.”
The central bank held the policy rate steady at five per cent in September, but did not deny the possibility of future rate hikes, citing inflation as a main concern.
July’s GDP figures are expected to reflect the adverse impacts of two major events: the wildfires across the country as well as the port workers’ strike in British Columbia. The labour disruption, which began July 1 and ended in early August, affected 17 per cent of Canadian retailers’ business, Statistics Canada said last week.
