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Corrective Cycle

By Anahita Alinejad
     OTTAWA (MNI) - Canada's economic growth probably slowed again in July,
mirroring expectations the third quarter will be much weaker than the previous
three months.
     Gross domestic product probably expanded 0.1% in July after June's 0.2%
gain according to an MNI economist median. That would be the fourth month in a
row the expansion has slowed from a peak of 0.5% in March. Advance reports on
July GDP components show a drop in manufacturing and a flat reading for retail
volumes, while growth is supported by strong wholesale sales.
     The economy is slowing from the second quarter's 3.7% annualized pace that
was much faster than the Bank of Canada predicted. The BOC forecasts that growth
will slow to a 1.5% pace in the July-to-September period, and policy makers at
their last meeting kept the key interest rate at 1.75% saying the economy was
close to its full potential.
     Some of the strength in the second quarter came from gains in energy
production and exports that appeared temporary, and as consumer spending that
led growth for years faded. Most major economies including Canada's today are
being weakened by global trade tensions that hurt exports and business
investment. The monthly GDP figures for Canada also showed a consistent slowdown
as the second quarter progressed. 
     Not all of growth story points to a major slowdown in the third quarter.
Manufacturing may boost the economy because July's decline was linked to
shutdowns at a major auto factory that was retooling to produce a different
model.
--MNI Ottawa Bureau; +1 613 981-1671; email: anahita.alinejad.ext@marketnews.com
[TOPICS: MACDS$,M$C$$$]