GDP numbers Friday expected to show economy started 2017 strong
Strong manufacturing, retail and wholesale reports give strength to economy
Some economists are revising their forecasts upward for Canadian first-quarter gross domestic product growth, ahead of the Friday release of figures for January.
The market consensus for January calls for a growth rate of 0.3 per cent, which would match the December report. Several bank economists, however, now expect to see growth of 0.4 per cent for the first month of 2017.
TD Economics expects the goods sector to benefit from gains in manufacturing and a continuing recovery in resources, although they anticipate a pullback in utilities due to unseasonably warm weather. Meanwhile, TD expects Canada's services sector will be supported by strong retail sales and the housing market.
At CIBC, economist Nick Exarhos said in a recent commentary that the Canadian economy "seems to be firing on almost all of its cylinders," with recent strong reports on manufacturing, wholesale trade and retail sales.
"As a result, we're upgrading our quarterly growth outlook to roughly 3½ per cent after a strong January performance, even allowing for more tepid gains over the balance of the quarter," he said.
BMO said that growth of 0.4 per cent for January builds into a gain of at least 2.7 per cent for the quarter.
"We have, for now, held to our call of 2.3 per cent growth for all of 2017, but have the pencil and eraser at the ready to nudge that higher," BMO Capital Markets chief economist Douglas Porter said in a recent commentary.
The Bank of Canada is currently projecting 2.1 per cent growth for 2017, while last week's federal budget estimate called for an expansion of 1.9 per cent.
Canada's central bank elected to hold its trend-setting interest rate steady at 0.5 per cent when it announced its most recent decision on March 1. At the time, it cited "significant uncertainties" weighing on the outlook for the economy.
However, some observers believe the central bank will have to change its stance soon.
"Growth is coming fast and furious recently, and even with a slower pace expected for the back half of the year, we should be on track to close the output gap sometime in early 2018," said CIBC's Exarhos.
"As a result, there's only so much longer that the Bank of Canada can maintain its overtly dovish tone, without at least acknowledging the recent beats on the economic front."