Canada’s economy started the year with a whimper, dragged down by bad weather and an even worse U.S. economy.
Two key economic releases this week will provide a clue whether the rest of the year is any better – gross domestic product for April on Monday and merchandise trade for May on Thursday.
Analysts are expecting decent economic growth, and a modest pick-up in exports on the strength of higher crude oil, coal and auto shipments.
“Canadians took off their winter boots and decided to shake off the snow left over from a disappointing first quarter,” said Nick Exarhos of CIBC World Markets.
CIBC is forecasting an acceleration in monthly growth in GDP – the broadest measure of economic activity – to 0.3 per cent in April, up from just 0.1 per cent in March.
Mr. Exarhos credits pent-up economic activity, plus strong auto sales and housing starts.
Manufacturing and wholesale activity was also up in April, which should provide a lift to GDP.
One component of GDP that likely won’t give the economy much of a lift is the entertainment and recreation category. That’s because only one of Canada’s seven NHL teams made the Stanley Cup playoffs, costing teams lucrative ticket sales, National Bank of Canada pointed out in a research note.
The export sector remains a key preoccupation of Bank of Canada Governor Stephen Poloz. He has warned that if exports don’t pick up soon from their postrecession slump, the economy could miss the bank’s growth and inflation targets this year and beyond.
Canada posted a nearly $600-million trade deficit in April. The consensus forecast among economists is for that to be cut in half, to $300-million. Canada has posted a trade surplus only three times since early 2012.
The central bank expects Canada’s economy to grow at an annual rate of 2.5 per cent in the second quarter. But that could prove to be a high bar.
HSBC Bank Canada chief economist David Watt said Canada will be lucky to expand 2.1 per cent, up from 1.2 per cent in the first quarter.
Mr. Watt expects imports to start picking up. But he said weak job and income growth, combined with heavy debt levels, mean consumers won’t be providing much of a lift to the economy in the next few months. Governments are also in austerity mode, both in Ottawa and most of the provinces, he added.