TH: Canadian economy slows more than expected in Q3
OTTAWA — The Canadian economy slowed more than expected in the third quarter as lower exports and a weaker housing sector cut into growth.
Gross domestic product edged up one per cent between July and September on an annualized basis, Statistics Canada said Tuesday, after a revised gain of 2.3 per cent in the previous quarter. For September, GDP declined 0.1 per cent from the previous month.
On average, economists had expected growth of 1.5 per cent in the third quarter and a 0.1 per cent gain in September.
The Canadian dollar was trading around 97.28 cents US after the GDP report, down from Monday’s close of 98.17 cents US.
Douglas Porter, deputy chief economist at BMO Capital Markets, said the “deadweight drag of sagging net exports is keeping Canadian GDP growth under wraps.”
“While the economy has managed to rise 3.4 per cent in the past year, that’s barely better than the 3.2 per cent U.S. growth rate over that period, and is far from a robust recovery.”
He added: “Bottom line for the Bank of Canada — there’s zero rush to raise rates again.”
The Organization for Economic Cooperation and Development is calling for growth of three per cent for Canada this year, 2.3 per cent in 2011 and three per cent in 2012. With the exception of 2012, the outlook matches that of the Bank of Canada.
“The economic recovery has slowed sharply as a result of waning expansion of external demand and a retrenchment in household spending growth,” the OECD said about Canada in its report earlier this moth.
However, the Paris-based group said economic activity “is nevertheless projected to progress at a moderate pace through 2011-12 as employment prospects and external demand gradually pick up again.”
Statistics Canada said exports declined 1.3 per cent in the third quarter after advancing in the previous four quarters. “The main contributors to the decline in goods exports were automotive products (down 2.1 per cent) and energy products (down 8.5 per cent), while commercial services (down 1.7 per cent) contributed the most to the decline in services exports,” the federal agency said.
Housing investment dropped 1.3 per cent, marking the first decline since the first quarter of 2009.
Meanwhile, import rose 1.6 per cent between July and September period —the fifth consecutive quarterly increase.
“In a nutshell, this result is a clear disappointment, especially after the surprisingly perky growth rates seen earlier this year,” Porter said. “In hindsight, it looks like the economy borrowed all the growth from the second half of the year and put it in the first few months of 2010.”
