Canada Q1 GDP annualized +3.1% vs +5.4% expected

• Prior quarter was +6.7% (revised to +6.6%)
• March GDP +0.7% m/m
• Feb GDP +1.1% (revised to +0.9% m/m)
• April flash GDP estimate +0.2% m/m
• Q1 real GDP +0.8% vs +1.6% q/q
• Q1 GDP price index +2.9% q/q vs +1.9% prior

The Bank of Canada estimate was 3.0% and their decision is tomorrow. This is a big miss, though still slightly above the BOC estimate. After yesterday’s strong current account data, many were leaning towards a 6% reading.

Details:

• Export volumes declined 2.4%
• Investment in residential construction rose for a second consecutive quarter, up 4.3%
• Business investment in non-residential structures (+2.9%) and in machinery and equipment (+0.9%)
• Compensation of employees rose 3.8% on a nominal basis
• 8.1% household savings rate in the first quarter vs 6.9% in Q4 (prior to 2020, the avg was 3.5%)

Tomorrow’s BOC decision is a slam-dunk 50 bps hike but the July meeting is at 80% and could drift a bit lower. I still strongly suspect the BOC will signal aggressive action but this and the sudden stop in housing will give them a bit of pause.

 CAD