Canada 2Q GDP Up 3.7%, Beats Expected 3.1%, Fastest in 2 Yrs>

By Greg Quinn

     OTTAWA (MNI) - Canada's gross domestic product grew at the fastest 

pace in two years in the second quarter, beating economist forecasts 

as surging exports offset weak consumer spending and business 

investment. 

     The economy grew at a 3.7% annualized pace versus the MNI 

economist median of 3.1%. The quarter ended with a June GDP gain of 

0.2% that was also faster than the 0.1% MNI median. Statistics Canada 

also boosted first-quarter growth to 0.5% from 0.4%.

     The expansion is also much stronger than the Bank of Canada's 

projection of 2.3%, meaning policy makers have less reason to signal 

the need for an interest-rate cut at their meeting next Wednesday. 

The GDP gain rounds out an economy showing other signs of resilience 

such as inflation at the BOC's 2% target and unemployment near 

record lows.

     Investors have still raised bets in the last few weeks on Governor 

Stephen Poloz cutting the 1.75% rate in October because of growing signs 

of a global trade war. The last rate decision amplified warnings about 

the damage from the U.S.-China dispute while affirming that monetary 

policy remained appropriate. 

     Today's GDP report did show some signs that the current growth rate 

will likely slow in the second half of the year. Exports rose 13.4% in 

the second quarter, the fastest in five years, partly reflecting a 

short-term rebound in oil production. 

     Imports declined 4 percent on a large drop in aircraft shipments, 

suggesting a reversal in the next quarter that could slow Canada's 

growth further.  

     The bigger problem could be weakness in the domestic spending that 

has carried the economy for much of the last decade. Household spending 

growth slowed to 0.5% from 2.9% in the first quarter, with the weakest 

gain in seven years led by falling automobile purchases.

     Business spending on non-residential buildings, machinery and 

equipment fell for the fourth time in five quarters between April and 

June. Spending fell 16.2%, the most since the end of 2016.

--MNI Ottawa Bureau; email: greg.quinn@marketnews.com, +1-613-314-9647 

     [TOPICS: MACDS$,M$C$$$]