Canadian Q1 GDP to arrive softer at 0.4% q/q - TDS

The TD Securities (TDS) Analysts offer a brief preview on what to expect from today’s monthly as well as the quarterly release of the Canadian GDP growth figures, due at 1230 GMT.

Key Quotes:

“We look for another soft quarter for economic activity with growth of just 0.4% (q/q, annualized) in Q1. Beneath the repeat headline number should be better details. 

Imports and other data suggest a rebound of business investment at the start of the year (+7.7%) and a healthy labor market likely underpinned a moderate pickup in household spending (+2.1%), notably on services. 

Conversely, recently revised construction data and soft resale activity point to little growth in residential investment (+1.5%). 

The key headwind to GDP growth in Q1 will be the sizeable drop in exports (-5.6%), where the quarterly performance was disappointing across most product categories. 

Offsetting this is an expected jump in business inventories (adding 1.5 p.p. to headline growth) as levels in the energy sector remained elevated post-curtailment and stockpiles elsewhere continued to build.

The 0.3% print will provide a solid handoff to Q2 where the Bank of Canada has set the bar low with projections for 1.3%.

A disappointing headline might generate a knee-jerk pop in USDCAD, though, under the hood, the details should be more relevant. We also suspect that the near-term direction of risk sentiment will offer the more powerful signal.”