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Canada’s Second-Quarter Growth Slows to 1.7% Pace

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Canada’s Second-Quarter Growth Slows to 1.7% Pace

Canada’s economic growth slowed in the second quarter as business investment and energy exports declined, cementing views that the central bank won’t raise interest rates for at least a year.

Gross domestic product rose at a 1.7 percent annualized pace from April to June, Statistics Canada said today in Ottawa, while economists surveyed by Bloomberg forecast a 1.6 percent rate. The quarter ended with a 0.5 percent decline for June that was the biggest since March 2009, during the last recession.

Canada’s economy is slowing as its Group of Seven peers show signs of improvement. U.S. growth quickened to a 2.5 percent pace in the second quarter and the euro-area emerged from a record six quarters of recession, while U.K. growth accelerated to 0.7 percent.

Growth will be “choppy” in coming months because of flooding in Alberta and a Quebec construction strike during June, Bank of Canada Governor Stephen Poloz said in a July 17 forecast. Today’s data is the last major report to be used in deliberations for the central bank’s Sept. 4 interest-rate decision, and economists say policy makers will keep the benchmark at 1 percent, where it’s been since September 2010.

“The Bank of Canada is likely to be on hold for at least a year” as growth rebuilds, said Camilla Sutton, head of currency strategy at Bank of Nova Scotia (BNS) in Toronto. “The drop quarter over quarter will be widely attributed to flooding in Alberta and labor issues in Quebec,” she said, adding that U.S. growth will help support a Canadian recovery.

Expansion Forecast

The Canadian dollar was little changed at C$1.0531 per U.S. dollar at 9:50 a.m. in Toronto. It earlier depreciated to C$1.0550, the weakest since Aug. 23. Two-year bond yields were unchanged at 1.19 percent.

The central bank forecast expansion at a 1 percent annual rate in the second quarter, accelerating to 3.8 percent growth from July to September, aided by the impact of a weaker currency and growing U.S. orders.

“They will probably have to take that third-quarter rebound down now,” said Robert Kavcic, senior economist at Bank of Montreal in Toronto. “The effect of those special factors like the flood and the construction strike weren’t as big as they were expecting,” he said, adding the pace of consumer spending “probably isn’t too sustainable.”

Consumer spending supported growth by rising at the fastest pace since the fourth quarter of 2010, with the 3.8 percent annualized increase led by automobile purchases, Statistics Canada said.

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