The Canadian economy grew 2.4 per cent in the fourth quarter of 2014, led by growth in consumer spending and inventory accumulation. Both exports and business investment, two key pillars of the Bank of Canada's hoped for rotation of away from consumption led growth, declined. For all of 2014, Canadian economic growth registered 2.5 per cent, following just 2 per cent growth in 2013.
We expect growth will decelerate slightly in 2015 to about 2.2 per cent, with the first half of the year seeing sub-2 per cent growth, as low oil prices drag investment and employment lower in oil and gas producing provinces. That outlook includes a further reduction of the Bank of Canada's overnight rate to 0.5 per cent occurring either at the Bank's April meeting or later in the summer. However, better than anticipated GDP or employment growth and firmer than expected core inflation could keep the Bank from moving on rates any further this year.