Bank of Canada releases economic forecasts: Sees 2025 GDP growth at 1.8% vs 2.1% prior ...Middle East

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Bank of Canada releases economic forecasts: Sees 2025 GDP growth at 1.8% vs 2.1% prior

The Bank of Canada had flagged in its December statement that it was likely to revise down 2025 GDP forecasts.

Canadian forecasts compared to October:

    2025 GDP growth forecast cut to 1.8% from 2.1%Q4 2024 GDP growth trimmed to 1.8% from 2.0%CPI inflation revised up for 2024 annual (2.4% vs 2.3%)Core inflation notably higher in Q4 2024 (2.6% vs 2.3%)2025 CPI seen at 2.3% vs 2.2% priorQ4 CPI seen at 3.3% vs 2.0% prior The output gap is estimated to be about 0.3 pp narrower than it was before upward revisions to historical data and is at -1.25% to -0.25% (vs -1.75% to -0.75% in Oct)

    US growth edged up to 2.6% (prev 2.4%)China growth higher at 4.9% (prev 4.3%)Euro area lower at 0.8% (prev 1.2%)Global growth steady at 3.1%

    Critically, these forecasts don't include the potential impacts of tariffs.

    Domestically, there is only a 0.3 pp downgrade in growth but the composition is significantly changed:

    Consumption growth forecast nearly doubled to 1.3% (prev 0.7%)Business investment sharply lower at 0.1% (prev 0.4%)Exports dramatically reduced to 0.6% (prev 1.5%)Final domestic demand slightly higher at 2.4% (prev 2.2%)

    That's asking a lot from the consumer.

    This article was written by Adam Button at www.forexlive.com.

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