Canada’s GDP contracted by 0.2% in February; slight growth is likely in March.
Canada’s gross domestic product contracted by 0.2% in February for the first time since November due to shrinking activities across mining, oil and gas, and construction sectors. The Bank of Canada and economists predict that growth will continue to contract in the coming months due to the impact of U.S. tariffs. Trump’s constant threat of tariffs forced many to bring forward purchases, leading to an uptick in manufacturing numbers in February. However, as inventories build up, tariff fears have started to affect demand and investments, showing across economic indicators.
The deceleration in growth in February forced markets to change bets for a rate cut chance in June to a little higher than 50% from 45% earlier. The Canadian dollar was trading slightly weaker, with the loonie down 0.04% to 1.3838 to the U.S. dollar, or 72.26 U.S. cents. Yields on two-year government bonds were down four basis points to 2.553%.
Analysts polled by Reuters had expected the economy to stay flat in February, in line with Statistics Canada’s advance estimate last month. The economy is likely to expand by 0.1% in March, and on an annualized basis, the GDP is expected to grow by 1.5% in the first quarter.
Canada’s economic growth had been anemic in the first half of last year but strengthened as the year ended on the back of rapidly falling interest rates and consumer prices. As the country grapples with steel, aluminum, and automotive tariffs and various other import duties from the United States, output will continue to be depressed.
Source: Globe and Mail
Source: The Star
Source: Financial Post
Source: Statistics Canada
Canadian Retail Sales Fell 0.4% to $69.3 Billion in February
Consumers in Canada increased retail sales in March to prepare for US tariffs, but weakening discretionary and cyclical spending could prompt the Bank of Canada to cut interest rates again, according to economists.
Retail sales in March increased by 0.7% month over month, the first increase of the year and a significant jump from the 0.4% contraction in February. Core sales, which exclude automobiles and gasoline, rose 0.5% from January, outpacing estimates for a contraction of 0.2%.
David Rosenberg, an economist and founder of Rosenberg Research & Associates Inc., noted a “grim message” in February data due to a 1.7% drop in cyclically sensitive spending, including a 2.8% drop in building materials spending, a 2.9% decrease in furniture/appliances, and a 2.7% drop in clothing sales. Much of the gain in non-core items could be attributed to increases in food and pharmaceutical sales.
Shelly Kaushik, a senior economist at BMO Economics, said the estimate for March is the bigger story, as it reflects the anticipated increase in auto sales ahead of US tariffs and Canadian countermeasures.
Source: Globe and Mail
Source: The Star
Source: Financial Post
Source: Statistics Canada
U.S. Economy Contracts in First Quarter as Tariffs Unleash Flood of Imports
The US economy experienced a 0.3 percent annual decline from January to March, marking the first drop in three years. It was slowed by a surge in imports, driven by companies trying to import foreign goods before President Donald Trump imposed massive tariffs. The January-March expansion in gross domestic product was down from 2.4% in the last three months of 2024.
Imports slowed first-quarter growth by 5 percentage points. Consumer spending also slowed, with federal government spending dropping 5.1%. However, business investment rose by 21.9% as companies invested in equipment. A category within the GDP data measuring the economy’s underlying strength rose at a healthy 3% annual rate from January to March, up from 2.9% in the fourth quarter of 2024.
Trump inherited a solid economy that had grown steadily despite high interest rates imposed by the Federal Reserve to fight inflation. His erratic trade policies — including 145 percent tariffs on China — have paralyzed businesses and threatened to raise prices and hurt consumers.
Source: Globe and Mail
Source: Financial Post
Preemptive Buying Ahead of Tariffs Powers U.S. Retail Sales in March
U.S. retail sales increased by the most in more than two years in March, driven by households stepping up purchases of motor vehicles and other goods to avoid higher prices from tariffs. This robust sales pace reported by the Commerce Department on Wednesday will probably fizzle in the months ahead as consumers hunker down. Economists’ gross domestic product growth estimates for the January-March quarter remained stuck below a 0.5% annualized rate, keeping intact investors’ fears of stagnant growth and high inflation, commonly referred to as stagflation.
Federal Reserve Chair Jerome Powell acknowledged the economy appeared to have slowed last quarter, noting that inflation is likely to go up as tariffs find their way and some part of those tariffs comes to be paid by the public. Bill Adams, chief economist at Comerica Bank, said that the economic outlook is in flux with large changes to trade policy nearly every day. Businesses selling cars, appliances, and electronics are likely to see less demand in the next month or two as panic buying ends.
Retail sales increased 1.4% last month, the largest gain since January 2023, after an unrevised 0.2% rise in February. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, accelerating 1.3%. Sales soared 4.6% year-on-year in March. Trump’s 25% global car and truck tariffs came into effect in early April, with industry analysts and manufacturers warning that the duties would significantly raise motor vehicle prices.
Motor vehicle manufacturers reported a big jump in auto sales in March, attributed by some to a rush by buyers “to try and beat the tariffs.” A slew of other duties have been imposed on most goods, resulting in a stampede by consumers to stock up.
Receipts at auto dealerships accelerated 5.3%, the biggest advance since January 2023. Sales at building material and garden equipment suppliers shot up 3.3%. Sporting goods, hobby, musical instrument, and bookstore sales rose 2.4%.
Receipts at food services and drinking places rebounded 1.8%, the largest increase since January 2023. Economists view dining out as a key indicator of household finances. Bank credit and debit card data suggest spending continues to be driven by high-income households, with low-income consumers struggling. However, amid the sharp losses in asset prices, there are worries high-income households could start retrenching.
Consumer sentiment is near three-year lows, with 12-month inflation expectations the highest since 1981. Mass layoffs of public workers as part of an unprecedented campaign by the Trump administration to downsize the federal government are also weighing on morale and could be a potential drag on spending.
Economists said the current economic environment could spur precautionary saving, potentially undercutting spending. Consumer spending slowed to about a 1% rate in the first quarter because of sluggish outlays on services, outside of necessities like utilities and insurance.
Source: Globe and Mail
