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Free AccessREPEAT: MNI DATA ANALYSIS: Canada 2Q GDP Adds Some Upside Risk
Repeats Story Initially Transmitted at 22:39 GMT Aug 30/18:39 EST Aug 30
By Yali N'Diaye
OTTAWA (MNI) - Canada's GDP expanded at an annualized pace of 2.9% in the
second quarter, slightly more than the Bank of Canada's 2.8% projection, adding
upside risk to the domestic growth outlook.
The gain was reinforced by an upward revision to the first quarter growth
estimate to 1.4% from the initially reported 1.3% gain that was factored into
the central bank's projections.
--STRONG EXPORTS
The data published Friday by Statistics Canada supported the BOC's export
scenario.
"Exports are being buoyed by strong global demand and higher commodity
prices," the BOC said in its July policy statement.
It attributed export strength in the first half of this year to oil,
following temporary pipeline shutdowns in late 2017.
Friday's report did confirm that oil boosted exports in the second quarter,
while services exports contracted (-0.2%) for the first time since the fourth
quarter 2015.
Nonetheless, exports excluding energy were still up 2.2% after decreasing
0.6% in the first quarter.
The strong export performance, combined with the upward revision to U.S.
GDP growth in the second quarter, adds upside risk to the BOC's growth scenario.
In fact, stronger-than-expected U.S. GDP growth was among the upside risks cited
by the central bank itself in the July Monetary Policy Report.
--HOUSEHOLD SPENDING PICKS UP
Household spending growth also accelerated in the second quarter, with a
0.6% pace that was twice as fast as the 0.3% recorded in the first quarter.
The rebound came after a slowing trend that had dominated since the
beginning of last year. It remains to be seen whether consumers will continue to
spend at a higher rate, which would also add to the upside risk to the inflation
outlook and challenge the BOC's growth rotation scenario.
--BUSINESS INVESTMENT SLOWDOWN
That being said, the upside risk to the inflation outlook stemming from GDP
growth is only moderate.
In particular, Canadian business investment slowed down further in the
second quarter, posting a 0.4% gain, the smallest since the fourth quarter 2016.
--SLOWING MOMENTUM
In addition, monthly data on GDP by industry published Friday showed that
activity was losing momentum going into the third quarter.
June GDP was flat after expanding 0.5% in May. Output in goods-producing
industries contracted 0.2%, with declines across the board, except in
manufacturing (+0.3%).
Services GDP edged up 0.1% in June despite lower wholesale and retail
sales, after a 0.5% gain in May.
--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com
To read the full story
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Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.