The Canadian economy witnessed a stumbling in its growth during last February, after a strong start for the year, in light of the escalation of fears of a possible trade war with the United States and the imposition of additional customs duties, according to initial data published by the Canadian Statistics Authority, and was reported by Bloomberg Agency on Friday.
The data showed that the gross domestic product remained unchanged last February, after achieving a strong growth of 0.4% in January, which is the fastest rate of monthly growth since April of last year, and exceeded the expectations of economists at the time.
According to industrial estimates, the failure to register any growth in March also means that the Canadian economy may record an annual growth rate of 2.1%in the first quarter of the year, which is slightly higher than the expectations of Canada Bank of 2%, and higher than economists’ expectations for Bloomberg, which amounted to 1.6%. However, this constitutes a slowdown compared to a growth of 2.6% in the fourth quarter of 2024.
The activity decreased due to the threats of customs duties
But this slowdown in momentum does not necessarily mean that the Bank of Canada will go to reduce the interest rate at its next meeting scheduled for April 16, as the agency indicated.
Canadian Central Bank Governor Tif Makalam explained that the escalation of inflation caused by customs duties may restrict the bank’s ability to support economic growth by reducing interest.
“The risk of high inflation as a result of a commercial war limits the bank’s ability to stimulate cash,” said McA
Sectors conflict with economic performance
Some sectors, such as manufacturing and financial services, witnessed a growth in February, but this was met by declines in real estate sectors, oil and gas extraction, and retail trade. The Statistics Agency had indicated last week that consumer spending for the second month in a row, according to preliminary data for February.
In January, the productive industries contributed to the advancement of economic growth, increasing by 1.1%, the largest increase since October 2021, thanks to a recovery in the mining, oil, gas and manufacturing sectors, as well as a strong increase in wholesale trade, especially the auto distribution sector that has reached its highest level since February 2020.
The effect of expected fees on expectations
It is expected that the United States, under President Donald Trump’s management, will start imposing additional customs duties as of next April, under the name “mutual fees” followed by 25% fees on car imports on the third day of the same month, which may push the Canadian economy towards stagnation.
According to “Benjamin Rights”, the macroeconomic strategy at Montreal Bank, “the strong start of the year will not be of value if the next customs duties are implemented next week,” noting that the central bank may have to stand up to neutrality pending the full impact of American commercial policies.
For his part, Andrew Grangham said at the Canadian Empire Trade Bank that recent developments make the positive data of January last “old news”, adding that “the Bank of Canada Cezine carefully carefully the risks of growth in exchange for a stronger inflation in the short term.”
As for the “Charles Saint Arno”, the chief economist in Alberta Central, he saw that the “central” would have to balance the contraction of customs duties with the pressure of inflation resulting from high costs, stressing that “the recent governor’s statements clearly indicate that fears of inflation constitute a priority for the present time.”
