Canadian Growth Back On Track
Canadian monthly GDP data is now released for January, the month on month growth figure is 0.5%, although missing the expected level of 0.4% it is still an improvement on the December contraction of -0.5%.
This is a strong figure and proves that Canada is still on course to hit it’s targeted 2014 growth rate of 2.5%, in fact the latest annualized GDP reading equates to around 2.66%.
Core inflation has fallen back a quarter percent to 1.24% in recent months but is still not at a level that will bring undue concern to the Bank of Canada.
If anything is troubling the Canadian authorities it will be the unemployment rate, this is very stubbornly stuck around the 7% level. Although this represents a very slight improvement on the beginning of the year it is still trending around the two year average of 7.1%.
The Bank of Canada has not touched the Benchmark Interest rate since the middle of 2010 and nor does it intend to in the coming months. At 1% everything is within the parameters outlined by the BoC and so they are likely to maintain the wait and see approach for some time to come.
The Canadian Dollar has been steadily depreciating over the past two years, this has significantly aided the recovery for Canada as foreign trade lead growth, particularly in the commodity sector, is driving economic activity. There doesn’t appear to be any let up in the depreciation of the Canadian currency which has given up 10% against the US Dollar in the last 12 months and as much as 20% versus the Euro over the same time frame.
Domestic economic activity in Canada is relatively solid, however it is the fate of it’s trading partners that will really determine the pace of the Canadian recovery. Europe and the US seem a reasonable bet but the pace of the growth slowdown in China will be one of the real determinants for the Canadian economy going forward.
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