Canadian GDP numbers higher than expected in Q4: instant reaction

welcome back we have breaking news new Canadian gross domestic product numbers have just hit the screen uh they are stronger than expected uh the fourth quarter gross domestic product uh number for Canada comes in at an annualized pace of 1.0% that is 20 basis points more than the 0.8% expected by economists we also get an upward revision to the uh prior uh number this would be third quarter uh GD p uh now uh comes in at a contraction of 0.5% not the contraction of 1.1% that was initially report

ed from statistics Canada we have a leading Canadian Economist standing by David watt of HSBC we'll talk to him in just a moment in the meantime here are some stories that we're tracking for you here in the BNN Bloomberg [Music] Newsroom Toronto Dominion Bank has exceeded estimates on both the top and bottom line driven by strength in both its capital markets unit and its domestic retail business on the downside however Provisions for credit losses Rose to about $1 billion and like other Canadia

n Banks this quarter TD took a charge from a US regulator related to potential bank failures and the need to top up a Deposit Insurance Fund CIBC also topped estimates though adjusted profit declined compared to the same period the year before Revenue cled by 10% in the bank's Canadian business Provisions for credit losses Rose to $585 million CIBC says the increase reflects the current economic environment particularly in the US office and in Canadian consumer portfolios revenue and profit fell

in the latest quarter at a small Canadian Bank Laurentian Bank of Canada partially due to costs related to a computer system outage that hit the bank last year the Quebec based lenders says it has a strong level of liquidity as uh it has also strengthened its capital position and looks forward to launching its revamped strategic plan later this year there's another look at the US futures a different picture there uh South of the Border I'm just going to take a quick look at my screen to see if

we've had us uh economic data released in the past couple of minutes uh we have personal income personal spending numbers and the pce deflator numbers have all come in and those pce deflator numbers are considered crucial to the FED what I can tell you is that those numbers are exactly in line with expectations those pce deflator numbers I won't go through the details but there's no variance uh between what the uh Economist Community was expecting on pce deflator numbers and what has been report

ed whether is variance is on personal income uh personal income uh report came in much stronger than expected we'll get to those numbers in a moment uh let's talk to David wat in the in the meantime on these numbers from from uh the from statistics Canada on uh the Canadian gross domestic product David you've had a period of time to look at the numbers what do you think a short little period uh they're basically all over the map but the headline numbers like we got a better Q4 GDP number and not

a surprise that the contraction in Q3 was revised downward because the trade numbers look like that was going to suggest that so Canadian economy wasn't as weak in Q3 doing well coming into year end uh but the December number was flat which was quite a surprise to suggest so did we lose momentum going at to year end on a monthly basis but the January number looks like it's going to rise 0.4 so again it's this idea the Canadian economy just continues to show some resilience uh in the face of the

higher interest rates and the struggles that longer term what's the narrative here the slowing Canadian economy do we know where it's going in terms of this this trajectory well growth has slowed and I think that's sort of confirmed again and it's the idea like is it slowing enough to prompt an early Bank of Canada rate R cut no uh is it going strong enough to suggest that maybe the bank has to hike rates no so we're just sitting on the sidelines waiting to see how things evolve uh until condit

ions are in place for the bank to start cutting interest rates which again looks like around mid year I'll do one controversy just because there's not that much in this numbers and one thing we're looking for is the consumer and also the government spent stimulating it doesn't you know government's a big part of the Canadian economy but it's not that big if you do you have any work on the idea that if you take out a million you know new Canadians and you x that out that actually last year if we'

re still looking at last year's figures was an awful lot weaker than you know but it was stimulated also just because you had a a million new Canadians have you seen anything on that or do any comment on that well we have we have a lot of sort of focus on uh GDP and and as suppose looking at GDP here we look at GDP per capita and so that sort of shows our consumption per capita and they all show that when you take into consideration population growth a lot of the these economic Trends are soften

ing uh so you also have the idea that the consumption numbers were so strong in Q4 maybe that's because of the contribution of the of the new immigrants as well so we are getting some positive contributions from that but uh we're also get the idea that when you look at some of the underlying stats growth is not keeping up with population growth and on the important point about that one is the numbers that came out today is we're not getting an investment Boot and so what we're seeing is investme

nt continues to contract so from the bank of Canada's perspective and say the performance or the generation of income uh what we're getting is that productivity story is still a huge challenge for the Canadian economy so if we had high population growth and high productivity it would be fantastic for the Canadian economy but we're missing that productivity story which creates a number of hurdles for the economy and for generating income for all those new immigrants um we also have received a so-

called flash estimate that's a preliminary uh very much subject to revision estimate for January so a four W looking uh number from stats Canan today uh suggesting gross domestic product expanded by 0.4% in the month of January that would be the strongest monthly Pace in a year uh Bloomberg attributes this to a Resurgence of activity after public sector strikes in Quebec uh came to an end your thoughts bill on January perhaps being the strongest month of bro I'm sorry David S right in uh the str

ongest month of growth um uh in a year that strike activity we did expect that we knew ours worked had increased in January because of the end of the strikes in Quebec uh but again even then taking that away it's like most of the preliminary numbers suggested that January would be softer than that so still looks like the the economy started the year fairly well not necessarily a sign that it's all clear in terms of economic growth but again it started the year better than we anticipated going in

to q1 uh coming out of Q4 the q1 GDP number looks like it might be a little bit better than maybe we thought which might was going to be about flat so again it's that idea that the econom is not doing great but it's also not really doing poorly and so from the bank of Canada's perspective they're not seeing signs yet that suggest yes it's time to start discussing rate Cuts it's still we have to just wait and see what is what is the read through from these numbers to inflation are these inflation

uh inflation positive numbers uh again you've got everything uh on uh you couple of different ways to look at it I one way that I would sort of say is the Bank of Canada is very focused about wages and productivity and with business investment this soft it does not suggest that productivity is coming back yet so companies are going to be facing labor costs and weak productivity backdrops and are they going to start to try and P pass through price increases so again it's the idea that the way th

ings are evolving yes we seem to be heading towards rate cuts and easing inflationary pressures but uh but at the same time the Bank of Canada can't sort of declare Victory yet because companies still still might find with labor costs going up they have to sort of pass through some price increase you've mentioned productivity uh weak productivity a couple times your your brethren uh and your brothers and sisters in the economics Community mentioned this a lot what are some of the policy uh uh so

lutions that you'd like to see perhaps longer term to Canada's lagging productivity oh where do we start um we know that we've got this transition towards a low carbon economy and we've got to have everything that we can to sort of make that transition whether it's the electricity system being able to handle all the charging charging of the the electric vehicles and we basically got to make the investment to Electrify basically our transportation system I mean that's a big one that's a huge inve

stment story that's out there right now on a big macro scale and then for individual companies we need tax policy that continues to contribute and suggest to companies you know as opposed to leaving your earnings in the United States maybe bring them back and invest them in Canada and tilting the balance in candidat favor David