Which sectors are driving Canada's continued growth?

Statistics Canada data reveals the fastest-growing industries and the laggards in the economy's latest boost

Which sectors are driving Canada's continued growth?
Steve Randall

The Canadian economy continues to weather the multi-faceted global storm, making recession unlikely for now.

New data from Statistics Canada shows GDP rose 1.1% in February, the largest monthly gain in almost a year. While this was faster than expected, it was just before the war in Ukraine.

Looking at advance data for March, real GDP grew 0.5% and an annualized rate of 5.6%. This is the tenth consecutive monthly expansion of economic output.

The preliminary figures, which will be updated on May 31, also reveal total first quarter growth of 1.4%.

Gains have been strong across most industry sectors in recent months, led by consumer-facing sectors which have benefitted from re-opening following Omicron restrictions.

Going out, going up

The biggest sector gain was for accommodation and food which posted a 15% gain in February, erasing almost all of the previous two months’ declines.

Going out was back in fashion and the food and drink industry enjoyed a of 18%, while accommodation gained 9%.

Arts, entertainment, and recreation also saw an increase of more than 8% following two monthly declines.

Among other sectors, urban transit systems (+23%) and rail transportation (+9%) led a 3% overall rise in GDP for the transportation and warehousing sector. For rail, the gain was the largest in 8 years. Airlines posted an 8% gain.

Financial services

The finance and insurance sector increased by 0.4% in February overall.

Depository credit intermediation and other monetary authorities gained 0.5% thanks to home buyers keen to lock in rates before BoC hikes; and insurance carriers also gained 0.5%.

Investment services, funds, and other financial vehicles posted a 0.2% decline in output, but activity remained strong despite the escalation of Russia’s aggression towards Ukraine.

Construction; real estate; professional, technical, and scientific services; and mining, quarrying, and gas and oil extraction; all gained.  

Meanwhile, the month posted declines for retail (down 3%), utilities (-2.3%), and wholesale trade (-1.1%).

Rate hikes

The continued strength of the Canadian economy adds weight to expectation of a further jumbo interest rate hike by the BoC, which could be larger than the previous 50 basis point increase.

“The Bank of Canada has set the table for a 50bp hike in June, but data like this will have markets pricing in at least some chance that central bankers need to move more aggressively,” Royce Mendes, head of macro strategy at Desjardins Securities Inc., said in a report to investors.