Resilient Canadian Economy Nudges BoC Towards Rate Hikes

The Canadian economy appears to have continued growing in the third quarter, despite initial fears of stagnation after a strong second quarter. Economists estimate that GDP expanded by two percent on an annualized basis in the third quarter, exceeding the Bank of Canada's outlook for 1.5 percent.

According to Statistics Canada, gross domestic product in July was flat month over month, but grew 0.2 percent in August. The agency also revised June's GDP figure to 0.4 percent from 0.3 percent.

Derek Holt, vice-president of Scotiabank Economics, believes that the economy is more resilient than expected and estimates third-quarter GDP will come in at two percent annualized. He predicts that inflation will overwhelm any remaining economic slack, forcing the Bank of Canada to start hiking interest rates.

However, not all economists agree. Charles St-Arnaud, chief economist at Servus Credit Union, thinks growth could slow in September due to new US tariffs and notes that rising oil prices are a greater concern for the Bank of Canada than economic growth.