Canadian economy accelerates in Q3
The Canadian economy gained traction in the third quarter, accelerating at an annualized rate of 2.7 percent, according to Statistics Canada. On a quarterly basis, GDP expanded 0.7 percent, following 0.4 percent growth in Q2.
Gross domestic product is the most closely monitored economic growth indicator. It is a concise measure of the total value of goods and services produced in the economy.
Domestic demand was the biggest factor behind the unexpected growth, led by household and government consumption expenditure and business gross fixed capital formation. Business investments on plant and equipment expanded 0.6 percent after a decline of 0.3 percent in the second quarter.
The industrial sector increased production in the third quarter, as the total output of goods-producing industries rose 0.9 percent. By comparison, the service economy advanced 0.6 percent. The mining and oil and gas sector rebounded after a sudden drop in Q2, expanding 2.2 percent. Production growth was enjoyed by manufacturing, retail and wholesale trade industries. Financial services, public services and construction experienced modest growth.
“Although the pick-up in third quarter GDP growth is encouraging, it partly reflects the rebound from flooding in Alberta and the construction strike in Quebec,” according to Capital Economics. The Alberta flooding and Quebec strike shed 0.5 percent from the Canadian economy in June.
According to Douglas Porter of Bank of Montreal Capital Markets Economics, “Today’s sturdy results, while somewhat flawed, should nevertheless temporarily quiet some of the rampant bearishness in the Canadian dollar.”
The loonie is approaching a yearly low amid negative perceptions concerning the Canadian economy. The Bank of Canada slashed its growth forecast for the Canadian economy to 1.6 percent this year, 2.3 percent in 2014 and 2.6 percent in 2015. BOC Governor Stephen Poloz believes Canada will return to full capacity by the end of 2015.
The upbeat GDP report wasn’t enough to generate a stronger bid for the loonie, which declined another 14 pips against the US dollar. The greenback was trading right around 1.06 in the mid-day North American session.
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