Canada 2Q GDP 4.5%, Above Analysts Expectations of 3.7%>

By Courtney Tower

     OTTAWA (MNI) - Canadian second quarter annualized GDP growth soared 

by 4.5%, the largest gain since the third quarter 2011, Statistics 

Canada reported Thursday, which was well above analysts' expectations of 

3.7%. 

     Real GDP also topped expectations on a monthly basis, with a 0.3% 

growth rate, while analysts in a MNI survey had expected a 0.1% 

increase. 

     Two quarters of very strong growth, 4.5% in the second quarter and 

3.7% in the first, set Canada on a path likely to well exceed the Bank 

of Canada's expectation of 2.8% growth in the country for all of 2017. 

     The BOC presents a new policy rate decision on September 6. and 

analysts are saying the strong first half data and quiet inflation make 

a second hike since July almost certain before year's end. 

     On a quarterly basis, GDP rose +1.1% in the second quarter after 

growing 0.9% in the first quarter. The cumulative growth in the first 

two quarters (+2.0%) was the strongest since +2.1% in 2002. 

     Household final consumption expenditure, +1.1% in the second 

quarter following +1.2% in the first quarter, led the growth, as has 

been usual. The other chief leader was exports, jumping 2.3% in the 

second quarter following a 0.4% gain in the first. This was the largest 

gain since the second quarter 2014. 

     However, hopes for  important gains in non-resource exports were 

not met. Goods exports rose 2.8%, but that by far was due to a 9.2% 

increase in energy exports. Non-resource exports, hoped for as a major 

contributor to sustained growth did not fare so well. Excluding energy 

and minerals, exports grew 0.6% in the quarter, down from 0.8% growth in 

the  first quarter. 

     Imports rose 1.8%, "about half the pace of the previous quarter," 

Statistics Canada said. Goods imports rose 2.5% and services imports 

declined 1.0%. 

     The slowdown this quarter in housing resales and lower issuance of 

residential building permits by municipalities appeared to be reflected  

in business gross fixed capital formation slowing to 0.5% growth 

following a 3.1% increase in the first quarter. Most of the deceleration 

was due to a drop of -1.2% in investment in housing. Business investment 

in non-residential structures rose 2.4% after increasing 1.0% in the 

first quarter. 

     Statistics Canada said the decrease in investment in housing was 

due to a sharp 6.7% decline in ownership transfer costs, citing a new 

tax on home purchases in Ontario by non-residents. Renovations were up 

1.1%. New housing investment was "virtually unchanged," the agency said. 

     Strong inventory accumulation continued, by +C$11.5billion in the 

second quarter after +C$10.5 billion in the first. 

     Household savings were unchanged. Employee compensation grew 0.8% 

in nominal terms with wages and salaries rising 0.8%: a 1.1% increase 

for services industries more than offset a 0.1% decline for goods 

producing industries. 

     Corporate earnings edged down 0.1% in the second quarter. 

     For the month of June, the 0.3% increase in real gross domestic 

products was an increase for the eighth successive month. Goods 

producing industries rose +0.5% while services industries only edged up 

+0.2%.   

     --MNI Ottawa Bureau; email: yali.ndiaye@marketnews.com 

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