Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Economists cut Canada growth forecasts on floods, but see rate hikes on track

EconomyNov 24, 2021 12:15PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A flood affected road is seen after rainstorms lashed the western Canadian province of British Columbia, triggering landslides and floods, shutting highways, in Abbottsford, British Columbia, Canada November 21, 2021. REUTERS/Jennifer Gauthie

By Julie Gordon

OTTAWA (Reuters) - Floods that wiped out bridges, roads and rail lines in British Columbia will hurt Canada's economic growth and fuel inflation in the fourth quarter, but the Bank of Canada's rate-hike timing is likely to remain unchanged, economists said.

"We are trying to wrap our arms around this complex situation, and waiting to see just how long-lasting some of the blockages are," said Doug Porter, chief economist at BMO Capital Market Economics.

Porter halved his fourth quarter growth estimate to 3.0% from a year earlier. That drags down his full-year growth forecast to 4.8%, from a previous forecast of 5.0%, because of the floods and global supply chain disruptions.

"For the Bank of Canada, it's not obvious that the weaker growth figures will have much impact as they have hit the supply side and actually threaten to boost inflation even further," he added.

Economists are clear the flooding will have a material impact on near-term gross domestic product forecasts, but there is considerable uncertainty about how fast growth could bounce back.

It will take time to fully repair the infrastructure needed to transport goods https://www.reuters.com/markets/commodities/alcohol-auto-parts-canadas-warehouses-fill-up-floods-stop-flow-goods-2021-11-23 across the mountainous Pacific coast province, but key rail lines are set to reopen this week.

"Quantifying the overall economic impact when the situation is still in flux is fraught with uncertainty," said Jimmy Jean, chief economist at Desjardins Group, in a note.

Jean said that 2013 floods in Alberta undermined growth the month they hit, but then quickly rebounded.

"A rapid economic recovery following natural disasters is fairly typical," Jean said.

The Bank of Canada last month - before the floods - cut its growth forecasts and signaled rate hikes https://www.reuters.com/world/americas/bank-canada-signals-it-could-hike-rates-sooner-than-expected-2021-10-27 could start in the "middle quarters" of 2022.

The central bank warned inflation would go higher this year before easing back to the 2% target in late 2022. Canada's annual inflation rate hit 4.7% in October https://www.reuters.com/world/americas/canadas-annual-inflation-rate-hits-47-oct-highest-since-feb-2003-2021-11-17, the seventh straight month above the central bank's 1-3% control range.

"The inflationary shock will be more of a pressing concern for (the central bank) and will keep them on track," said Simon Harvey, senior FX market analyst at Monex Canada.

Money markets expect the Bank of Canada to start hiking rates in March 2022 with a total of five increases next year, but Stephen Brown, senior Canada economist at Capital Economics, questioned that pace.

"The hit to activity from the devastating floods in B.C. this week reduces the chance of the Bank becoming more hawkish any time soon," Brown said in a note.

Economists cut Canada growth forecasts on floods, but see rate hikes on track
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email