Forward guidance will be on vacation next week. Happy holidays to all our readers.
The final major data point from Statistics Canada in 2024 will be Monday’s gross domestic product release for October, which will be the last GDP print before the Bank of Canada’s Jan. 29 meeting. We look for a 0.2% increase that would be the strongest monthly gain since April, and firmer than the 0.1% advance estimate a month ago.
Activity in both the goods and services sectors will likely show an uptick in October. Early data is showing a rise in oil production in Alberta. The manufacturing sector posted a stronger month with sales (excluding price changes) up 1.4%. Retail sale volumes held steady in October but wholesale sales edged up and residential real estate posted a notable jump.
Still, softer momentum in earlier months means the tick higher in October output would leave GDP growth in Q4 as a whole tracking below the BoC’s 2% forecast—something the central bank already acknowledged when it made another 50 basis point cut to the overnight rate in December.
We expect the early estimate for November GDP will show limited growth, even with a likely boost in the entertainment sector from a fortnight of unusually well-attended concerts in Toronto. A 0.2% pull-back in November hours worked was partially related to labour disputes at ports and the Canada Post strike. Our tracking of consumer spending also looked softer in November with early holiday shopping potentially delayed ahead of a GST holiday that started mid-December.
The BoC signaled firmly in December that policymakers are planning a more gradual pace to interest rate cuts going forward, but we continue to expect the overnight rate will ultimately need to fall to net stimulative levels (below the BoC’s current 2.25% to 3.25% estimate of the neutral range) to allow the economy to strengthen and prevent inflation from running significantly below the 2% target.
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