Canada’s Q1 GDP growth lowest in almost two years

The pace of economic growth in Canada slowed in the first quarter of this year to its lowest rate in nearly two years as housing investment pulled back amid new mortgage stress test rules and a cooling housing market.

Statistics Canada said Thursday the economy grew at an annualized pace of 1.3% for the first three months of the year. That compared with an annual pace of 1.7% in the final three months of 2017.

Economists had expected growth to come in at an annualized rate of 1.8% for the first quarter of 2018, according to Thomson Reuters Eikon.

The rate of growth for real gross domestic product in the first quarter was the slowest pace since the economy contracted in the second quarter of 2016 due to forest fires that destroyed parts of Fort McMurray, Alta., and forced the shutdown of several oil sands operations in the region.

In the most recent quarter, investment in housing fell 1.9%, the largest decline since the first quarter of 2009, due to a drop in ownership transfer costs as the pace of home sales slowed at the start of the year.

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Meanwhile, household spending increased 0.3%, the slowest pace since the first quarter of 2015, while household spending on services increased 0.5% and spending on goods was unchanged.

Growth in export volumes slowed to 0.4% compared with 1% in the fourth quarter of 2017. The gains were mainly contributed by crude oil and bitumen and the export of services. Imports rose 1.2% in the quarter.

Business investment in machinery and equipment rose 4.2%, while intellectual property products rose 3.3%.

Looking back at 2017, Statistics Canada revised its real GDP numbers upward for the second and third quarters.

For the second quarter of 2017, the estimate for the annualized growth rate was increased to 4.6% compared with a March estimate of 4.4%, while the estimate for the third quarter was increased to 1.7% from 1.5%.

The latest reading on the economy follows the Bank of Canada’s decision to keep its key interest rate on hold.

“The first quarter wasn’t something to remember for the Canadian economy, but things are looking up from here,” said Royce Mendes, senior economist at CIBC Economics, in a note.

“While the Q1 numbers as a whole didn’t have much to cheer about, outside of a healthy gain in business capital spending, March data suggests that momentum reaccelerated at the end of the period. That has us upgrading our second quarter GDP forecast to 2.8%.

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