OTTAWA (Reuters) – The Canadian economy expanded at an annualized rate of 1.0% in the fourth quarter, exceeding expectations, and gross domestic product likely grew 0.4% in January, Statistics Canada data showed on Thursday.
The fourth-quarter growth rate was higher than the Bank of Canada’s (BoC’s) 0.0% forecast as well as the 0.8% growth rate expected by analysts in a Reuters poll.
Month-over-month, real GDP was essentially unchanged in December, missing a 0.2% growth forecast.
The stronger than expected rebound in quarterly growth after the GDP contracted in the previous quarter shows the central bank could keep rates on hold for longer to fight inflation without leading the economy into recession.
Quarterly growth was fueled by a rise in exports as imports declined, Statscan said, adding that a decline in business investment was a moderating factor.
The BoC expects economic growth to be modest in 2024 as effects of past interest rate increases continue to restrain consumption and business investment.
The bank’s next announcement on March. 6, when it is expected to keep its policy rate at a 22-year high of 5%.
The bank, which since July has kept rates unchanged, said last month that its focus was shifting to when to cut borrowing costs rather than whether to hike again.
Since the bank’s last rate announcement, data has been mixed with job growth exceeding expectations in January and inflation cooling faster than expected in February. At 2.9%, inflation is still running hotter than the bank’s 2% target.
In an advance estimate for January, Statscan said increases in educational services and health care and social assistance, were partially offset by decreases in mining, quarrying, and oil and gas extraction and transportation and warehousing sectors.
(Reporting by Ismail Shakil in Ottawa; Editing by Dale Smith)
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