The Canadian economy’s strong bounce back at the start of the year appears to have been short-lived, as new data suggests growth is on a downward trajectory.
Statistics Canada said Friday that the economy grew by 0.1 per cent in February. Its preliminary estimates suggests real gross domestic product grew at an annualized rate of 2.5 per cent in the first quarter, and contracted in March.
RBC assistant chief economist Nathan Janzen said If you look at the monthly details, you just see that all of that increase came from January. The Canadian economy bounced back with 0.6 per cent growth in January.
An economic slowdown has long been expected as interest rates have climbed higher. And while some economists had anticipated that slowdown to appear earlier, signs of weakness are now becoming more apparent.
“After sprinting out of the gate to start 2023, the Canadian economy had already hit a wall by March,” CIBC economist Andrew Granthan wrote in a client note.
As the economy continues to slow, the labour market is expected to feel the effects. So far, it’s remained surprisingly strong amid high interest rates, with the unemployment rate at five per cent in March.
Janzen said it can take two to three months for a slowdown to impact employment levels.
Unemployment is expected to rise eventually this year, as businesses facing slowing sales adjust their hiring plans.