Bank of Canada forecast for GDP, CPI from the April 2024 meeting

  • Monetary Policy Effectiveness: Inflation is slowing as monetary policy effectively reduces inflationary pressures; February’s CPI growth was at 2.8% with core inflation close to 3%.
  • Economic Growth Estimates: GDP, after stagnating in late 2023, is expected to rebound in early 2024, with volatile quarterly growth around 2% and an annual average growth of 1.5% in 2024.
  • Population and GDP Growth: Strong population growth supports the GDP increase, with annual growth projected at about 2% for 2025 and 2026.
  • GDP Per Capita and Consumer Confidence: GDP per capita growth is expected to be negative in the first half of 2024 but improve later in the year and into early 2025, helped by easing financial conditions and increased business and consumer confidence.
  • Immigration and Productivity: Robust potential output growth in 2024 is driven by strong immigration, compensating for ongoing weak productivity growth.
  • Economic Supply and Demand: Moderate excess supply is expected to persist through 2024, reducing early in 2025 as demand grows solidly and supply moderates, aiming for economic balance by 2026.
  • Inflation Projections: Inflation is anticipated to decrease gradually, moving below 2.5% in the latter half of 2024 and reaching 2% in 2025, with risks of slower adjustment noted, especially in service sectors like rent and mortgage interests.
  • Quarterly Economic Performance: GDP growth was about 1% in Q4 of 2023 after a contraction in Q3; growth is expected to average roughly 2% in the first half of 2024.
  • Consumer Spending and Government Expenditure: Consumer spending to average 1.5% in the first half of 2024, driven by population growth; government spending projected to increase from 2.5% in late 2023 to about 3.5% in early 2024, influenced by public sector developments and provincial budget measures.
  • Investment and Exports: Residential investment expected to strengthen due to housing demand and tight supply; export growth to be volatile, with notable contributions from the Trans Mountain Expansion project and gold shipments; business investment likely to recover modestly after a contraction period.

This article was written by Greg Michalowski at Source