Canada’s slow growth in the fourth quarter was not enough to trigger a technical recession, and one economist suggests the numbers will keep the Bank of Canada on the sideline regarding future interest rate cuts.

On Thursday, Statistics Canada reported the country’s gross domestic product (GDP) climbed at an annualized rate of one per cent in the fourth quarter of 2024, compared to a contraction of 0.5 per cent in the third quarter.

David Watt, chief economist with HSBC Canada, believes the Bank of Canada won’t begin cutting rates until the summer and Thursday’s figures further solidify the prediction.

“We seem to be heading towards rate cuts and easing inflationary pressures, but at the same time, the Bank of Canada can't declare victory yet because companies still might find with labour costs going up, they have to pass through some price increase,” he told BNN Bloomberg in a television interview on Thursday.

James Orlando, director and senior economist at TD Bank, said growth in the quarter was “widely expected,” but that the level of growth was above expectations.

“The narrative on the Canadian economy remains the same: high interest rates are weighing on economic growth,” Orlando wrote in a report on Thursday.

Orlando notes that when ignoring “international drivers” Canada’s GDP actually shrank and the country’s GDP per capita has fallen in five of the past six quarters.

“The (Bank of Canada) has recognized this weakness in recent commentaries, but it is patiently waiting for inflation to follow suit,” he wrote. “We think the wheels are in motion for this to come through the data in the coming months and have pencilled in the first (Bank of Canada) rate cut for June.”       

Colin White, CEO and portfolio manager at Verecan Capital Management, is not so convinced the Bank of Canada will wait before cutting rates.

“There is an argument to be made that the Bank of Canada should be, and will, pay more attention to the Canadian weakness and be motivated to cut rates rather than be comfortable missing a recession relying on the strength in the U.S.,” he said in a statement Thursday.

Overall, White said the recent GDP data, along with jobs and inflation, paints a decent picture for the Canadian economy.

“Strong jobs numbers, inflation under three per cent, and positive GDP is not a bad combination, if this was offered as an outcome a few months ago many economists would have happily taken the offer,” he said. “Very much feels like a soft landing right now, but the story is not over.”

Keith Reading, senior director of research at Morguard, said in a statement Thursday he expects the Bank of Canada to “tread carefully.”

 “Lower interest rates anticipated in the second half of 2024 will support an increase in both economic activity and real estate activity,” he said.

Monthly ups and downs

In December, growth was flat, while early projections show growth climbing by 0.4 per cent.

Watt said the monthly data is “all over the map,” just not enough for the Bank of Canada to take swift action in either direction.

“Is it slowing enough to prompt an early Bank of Canada rate cut? No,” he said. “Is it going strong enough to suggest that maybe the bank has to hike rates? No.”

“(The bank) is sitting on the sidelines, waiting to see how things evolve until conditions are in place for the bank to start cutting interest rates, which again looks like around mid-year.”

With files from The Canadian Press