{"id":60310,"date":"2025-05-30T16:01:15","date_gmt":"2025-05-30T16:01:15","guid":{"rendered":"https:\/\/www.pantheregroup.com\/2025\/05\/30\/bank-of-canada-decision-up-in-air-as-gdp-signals-frail-economy\/"},"modified":"2025-05-30T16:01:15","modified_gmt":"2025-05-30T16:01:15","slug":"bank-of-canada-decision-up-in-air-as-gdp-signals-frail-economy","status":"publish","type":"post","link":"https:\/\/www.pantheregroup.com\/2025\/05\/30\/bank-of-canada-decision-up-in-air-as-gdp-signals-frail-economy\/","title":{"rendered":"Bank of Canada decision up in air as GDP signals &#039;frail&#039; economy"},"content":{"rendered":"<p> \n<br \/><br \/>\n<iframe loading=\"lazy\" title=\"Bank of Canada could cut three more times: Desjardins\" width=\"1080\" height=\"608\" src=\"https:\/\/www.youtube.com\/embed\/2cexjouu8vQ?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><br \/>\n<\/iframe><\/p>\n<p> The headline economic growth numbers for Canada released Friday may have been surprising, but the underlying figures show a different story. <\/p>\n<p> Canada\u2019s economy grew<\/p>\n<p>                 at an annualized rate of 2.2 per cent in the first quarter of 2025, according to Statistics Canada, beating economists\u2019 expectations of 1.5 per cent. <\/p>\n<p> The growth in <\/p>\n<p>                gross domestic product (GDP)<\/p>\n<p>                 was largely driven by machinery investments and commodities extraction, but demand was largely flat in the quarter. <\/p>\n<p> Economists believe the growth can be attributed to companies getting ahead of tariffs, and that many of the underlying numbers paint a darker picture that the <\/p>\n<p>                Bank of Canada<\/p>\n<p>                 will have to consider. <\/p>\n<h2>Economy looks \u2018very frail\u2019: Desjardins<\/h2>\n<p> Although GDP growth beat expectations, Royce Mendes, managing director and head of macro strategy at Desjardins Capital Markets, said the economy still has work to do. <\/p>\n<p> He said exports to the United States drove Canada\u2019s economic growth as importers boosted orders to get ahead of planned tariffs, but there\u2019s a different story underneath. <\/p>\n<p> \u201cThe weak final domestic demand reading for Q1 suggests that the economy was stalling even before feeling the full impact of tariffs, he said in a note. \u201cGiven the deterioration in recent labour market indicators, we believe that the economy will struggle to post meaningful growth in the second quarter.\u201d <\/p>\n<p> Mendes expects the Bank of Canada to trim rates by 25 basis points next week. <\/p>\n<h2>\u2018Trade war-induced recession\u2019: Oxford Economics<\/h2>\n<p> Tony Stillo, director of Canada economics, and Michael Davenport, senior economist at Oxford Economics Canada, offered a stark outlook for Canada\u2019s economy in the wake of Statistics Canada pegging the GDP growth rate at 0.1 per cent in April. <\/p>\n<p> \u201cMomentum in the economy has faded amid unprecedented uncertainty from the trade war and new U.S.-Canada tariffs,\u201d they said in a note. \u201cWe think Canada\u2019s economy has slipped into a trade war-induced recession that will last through the end of 2025.\u201d <\/p>\n<p> They expect another interest rate hold next week as the <\/p>\n<p>                Bank of Canada<\/p>\n<p>                 \u201ctries to balance the downside risks to growth against the upside risks to inflation.\u201d <\/p>\n<h2>Concerning details: Capital Economics<\/h2>\n<p> Stephen Brown, deputy chief North America economist at Capital Economics Ltd., said GDP\u2019s growth in the first quarter was a surprise, but the underlying data are not nearly as positive. <\/p>\n<p> \u201cThe details were far more concerning than that headline figure might suggest,\u201d he said in a note. \u201cMost of the growth stemmed from net trade, as a 6.7 per cent annualized rise in exports outpaced a 4.4 per cent gain in imports amid tariff front-running in the U.S., as well as a big boost from the volatile inventories component.\u201d <\/p>\n<p> He expects the Bank of Canada will return to trimming rates next week but is not ruling out another pause. <\/p>\n<p> \u201cWe clearly can\u2019t rule out another pause as the (Bank of Canada) awaits for more information,\u201d he said. \u201cIndeed, market participants are more convinced than us, with interest rate swaps pricing in an 80 per cent chance of a pause.\u201d <\/p>\n<h2>Central bank to hold rates: RSM Canada<\/h2>\n<p> Tu Nguyen, an economist at RSM Canada, said she expects the economy to reverse its first-quarter gains later this year as U.S. tariffs take hold. <\/p>\n<p> \u201cThe economy will contract in the second quarter as tariffs and trade uncertainty stall trade and investments, unemployment rises, households tighten their purse strings, and the<\/p>\n<p>                 housing market<\/p>\n<p>                 remains lukewarm despite a spring of lower interest rates,\u201d she said in a note. <\/p>\n<p> She expects the Bank of Canada to hold interest rates again next week. <\/p>\n<p> <em>\u2022 Email: bcousins@postmedia.com<\/em> <\/p>\n<p> <em><strong>Bookmark our website and support our journalism:<\/strong> Don\u2019t miss the business news you need to know \u2014 add financialpost.com to your bookmarks and sign up for our newsletters here.<\/em> <\/p>\n\n<br \/>Bank of Canada decision up in air as GDP signals &#039;frail&#039; economy<\/a><br \/>\n<br \/>2025-05-30 16:01:15<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The headline economic growth numbers for Canada released Friday may have been surprising, but the underlying figures show a different story. Canada\u2019s economy grew at an annualized rate of 2.2&#8230;<\/p>\n","protected":false},"author":2,"featured_media":60311,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":{"0":"post-60310","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy"},"_links":{"self":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/60310","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/comments?post=60310"}],"version-history":[{"count":0,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/60310\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media\/60311"}],"wp:attachment":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media?parent=60310"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/categories?post=60310"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/tags?post=60310"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}