OTTAWA – The Canadian economy had another month of solid growth in April, building on strength seen in the first quarter and supporting expectations the Bank of Canada will soon begin increasing interest rates.
Statistics Canada said Friday the economy grew 0.2 per cent in April compared with an increase of 0.5 per cent in March.
The result matched the expectations of economists, according to Thomson Reuters.
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“While the April GDP report is no big surprise, it maintains a now lengthy run of Canadian data matching or topping expectations, and forecasts for 2017 growth just keep climbing,” Bank of Montreal chief economist Doug Porter wrote in a report.
“In a word, there’s nothing here to dissuade the Bank of Canada from looking to start removing some of the stimulus, likely starting just next month.”
The Bank of Canada’s key interest rate target sits at 0.5 per cent. An increase in the rate will likely prompt Canada’s big banks to raise their prime rates, a move that will drive up the costs of variable-rate mortgages and other borrowing tied to the benchmark rate.
Expectations that the Bank of Canada could raise rates sooner rather than later have ramped up in recent days following comments by Stephen Poloz that interest rate cuts made in 2015 have done their job. Poloz noted that the economy enjoyed surprisingly strong growth in the first quarter.
Statistics Canada said the growth in April came as service-producing industries increased 0.3 per cent, helped by widespread gains.
The arts, entertainment and recreation sector climbed 2.8 per cent for the month, helped by the five Canadian teams in the first round of the NHL playoffs and strong professional basketball and baseball attendance.
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Meanwhile, Statistics Canada says goods-producing industries were essentially unchanged for the month as an improvement by mining, quarrying, and oil and gas extraction was largely offset by a drop in manufacturing.
Mining, quarrying, and oil and gas extraction gained 1.2 per cent despite a 0.8 per cent drop in oil and gas extraction due to the impact of the Syncrude Mildred Lake oilsands upgrader fire in March.
The manufacturing sector fell 0.9 per cent in April.