EconoFACTS

March 31, 2022 | 09:05

Cdn. Monthly Real GDP (Jan.) — Solid Start to 2022

Economist

Managing Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal for over a decade. He is responsible for the Canadian macro-economic... (Read more)

Benjamin Reitzes

Managing Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal for over a decade. He is responsible for the Canadian macro-economic... (Read more)

The Canadian economy started the new year on an upbeat note, with activity expanding 0.2% in January, in line with the flash estimate. The positive reading comes despite pandemic-driven lockdowns and restrictions throughout the country in the month. After a number of waves, Canadians (household and businesses) have learned to better deal with pandemic-related restrictions. Fortunately, restrictions eased through the rest of the quarter, setting the stage for a solid rebound. Indeed, the flash estimate for February GDP is for 0.8% growth, which would match the best reading in eight months.

All the January gains were courtesy of goods sectors, with utilities leading the way, up 4%. The latter is the largest increase since 2016, as frigid weather throughout the country drove demand for heating. Agriculture saw its fourth consecutive month of solid growth, as the rebound from last year's slump continues. That left activity in the sector down just 1.4% y/y, after plunging as much as 15.6% y/y last fall. Construction was strong as well, with the housing market staying red-hot at the start of the year, though that's likely to change quickly with interest rates moving higher. Service sector activity was flat overall, as the pandemic restriction hammered recreation and hospitality. Strong gains in wholesale trade and retail sales provided an offset.

Key Takeaway: The surprisingly perky start to 2022 and strong advance reading for February, as services likely rebounded, sets the stage for an upgrade to our Q1 GDP call. Heading into the year, some slowdown in activity was expected due to the pandemic restrictions, but, unlike in past waves, that wasn't the case. Accordingly, it looks like Q1 GDP growth will clock in at around a 4% annualized rate, up from 2.5% previously.

Table 1 - Canada — Monthly Real GDP

(month/month % change)

Source: BMO Economics, Haver Analytics