By Kathleen Caulderwood - Economists predict that the Canadian GDP growth will outpace the U.S. this quarter, as markets slowly pick up after a rough winter. But the advantage won’t last long, and most expect the American economy to pick back up, outpacing Canada by the end of the year.
The Canadian economy is expected to grow 1.7 percent in the first quarter of this year. Though it’s a marked decline from 2.9 percent the quarter earlier, it still is far ahead of the U.S. GDP, which analysts expect will decline by 0.5 percent, as The Globe and Mail reported.
Unseasonably cold winter temperatures is a major reason for this, which is why U.S. growth is expected to outstrip Canada’s by the end of the year.
American first-quarter growth “should disappoint due to bad weather, but GDP activity will pick up in Q2,” wrote analysts from TD Bank in a note. They expect second-quarter growth to accelerate to 3.5 percent.
For Americans, “a return to stronger activity will be led by improving household spending, increase business investment, strengthening exports, elevated oil and gas development and a reduced pace of government restraint,” wrote Scotiabank analysts in a note. They expect
first-quarter growth to jump 1.5 percent in Canada and just 0.1 percent in the United States. However, they also expect American growth to hit 2.6 percent annually this year, while Canada hovers around 2.2 percent.
Some economists say it took more than a bad winter to dampen first-quarter rates.
“The more Canadian data we see on activity in March, the less reassured we are that the softness in the preceding three months was just a weather-related blip,” wrote Capital Economics’ David Madani, in a note, explaining that the U.S. economy actually lost a little momentum towards the end of the first quarter, and that he doesn’t expect especially stellar GDP growth after that.
“If bad weather was the only factor affecting economic activity during the first quarter, then presumably we would have seen signs that economic activity was gradually improving towards the end of the quarter, as the weather returned closer to seasonal norma,” he wrote.