Canadian GDP rose 0.3 per cent in April, led by growth in the mining, quarrying, and oil and gas sector. Goods-producing sectors rose 0.9 per cent while services-producing industries were up 0.1 per cent. Canadian real GDP is roughly 2.2 per cent above its pre-pandemic, February 2020 level. Preliminary estimates suggest that output in the Canadian economy shrank 0.2 per cent in May.

The Canadian economy continues to post relatively strong GDP growth numbers, although preliminary estimates are for a small contraction in May. The Bank of Canada has noted that the slack in the Canadian economy is absorbed, which is partly why it has hiked rates from 0.25 in March to 1.5 per cent currently. Amid continuing GDP growth and high inflation, the expectation is that the bank will again raise rates at its upcoming July 13th announcement by an outsized 0.75 per cent, following the US Fed. Our view is that the bank will continue quarterly rate hikes until the overnight policy rate reaches 2 to 3 per cent, roughly in line with the estimate of the neutral rate of interest. 

Copyright British Columbia Real Estate Association. Reprinted with permission.