Canada Economy Expanded 0.4 Percent in April


Canada's economy grew for the first time in three months in April, as the struggling manufacturing industry rebounded and wholesaling also gained.

Gross domestic product expanded 0.4 percent to C$1.23 trillion ($1.22 trillion), Statistics Canada said today in Ottawa.

The rebound may not point to a lasting recovery from the January-to-March period when the economy shrank for the first time in five years, as U.S. demand remains crippled by the subprime mortgage collapse and record gasoline costs. Economists say the Bank of Canada will keep interest rates at 3 percent through yearend, as factory layoffs are offset by an energy boom that's caused inflation to accelerate.

Vehicle production rose 7 percent in April, not enough to recoup a 13 percent plunge the month before, Statistics Canada said. Overall, manufacturing expanded by 1.9 percent in April after two straight declines.

Factory production has dropped 5.5 percent over the last year, as the Canadian dollar's appreciation to a record hurts exports and U.S. consumers buy fewer cars and trucks.

Canada's economy will expand 1.4 percent this year, the slowest since 1992, because of the export slump and higher borrowing costs, the Bank of Canada said on April 22.

The economy probably grew at a 0.7 percent pace in the second quarter that's ending today, according to the median of 20 predictions gathered by Bloomberg. Output shrank at a 0.3 percent pace in the first quarter.

Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty both say they've done enough to help the economy for now, with four rate cuts starting in December and C$60 billion of tax reductions announced last year.

Today's report included evidence the economy is responding to the stimulus. Wholesaling rose 2.1 percent in April and retailing rose 0.6 percent, Statistics Canada said.

Record demand for metals and energy has propped up the world's eighth-biggest economy during the U.S. slowdown by bolstering employment and consumer spending. Canada is home to the second-biggest crude oil reserves behind Saudi Arabia and is the No. 2 wheat exporter after the U.S.


TradingEconomics.com, Bloomberg
6/30/2008 6:29:14 AM