Weak Canadian GDP Data Opens Door for Stimulus Budget, Scotiabank Says

(Bloomberg) -- Canada’s sluggish economic data opens the door for Finance Minister Bill Morneau to spend more in his pre-election budget, according to Bank of Nova Scotia.

“Expect this kind of reading to provide cover for the Federal Government to add stimulus in the March 19th budget,” Derek Holt, head of capital markets economics at Scotiabank, said in a research note Friday. “I wouldn’t be surprised to see the emphasis upon quick shots that get stimulus immediately out the door, like more cash infusions for households as one option.”

The data could also raise pressure on Justin Trudeau’s finance minister to ease restrictions on homebuyers, Holt said. Nonetheless, he urged investors not to panic.

“I still believe that Q4 softness was transitory and a rebound will be in the cards,” he wrote. The report gives more reason for the Bank of Canada to pause its rate-hike path in the first half of the year, but has no material impact on the second half unless a rebound never materializes, he said.

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