By BDC
MONTREAL, Canada – Canadian economic activity is slowing. After the 0.5 and 0.2 percent rises in GDP in the first two months of 2024, growth in March was forecasted to have remained flat. The Bank of Canada’s higher interest rates seem to be working their way through the economy. We reiterate that we expect the Bank of Canada to start lowering rates by mid-July, bringing them down to 4.25 or 4 percent by year-end.
The loonie weakens in April
The Canadian dollar weakened in April, averaging US$0.73, a hundred basis points lower than the previous month. The US dollar has appreciated since the start of the year, reflecting the strength of the US economy as well as rate cut expectations being pushed back further.
The US dollar will remain strong in the current context, which will further support the competitiveness of Canadian exports. We expect the exchange rate to fluctuate between US$0.72 and US$0.75.
Sharp drop in confidence this month
The CFIB’s confidence index for the year ahead dropped in April. Optimism decreased from 52.7 to 47.5 between March and April. A minimum wage increase on April 1 in many provinces put pressure on small businesses that are feeling the pinch of higher interest rates more than larger businesses.
Confidence varied among provinces. While most provinces remain optimistic, two of the largest, Quebec and Ontario, registered levels below the 50 mark.