Canadian Growth Slowed in Second Quarter


The Canadian economy in the second quarter expanded at less than half the pace set in the first three months of the year, undercutting economists’ expectations and raising questions about whether the country’s central bank will tighten interest rates next week.

Gross domestic product grew at a 0.5% quarterly rate or an annualized 2.0%, on weaker spending in the retail and wholesale sectors and a downturn in the housing market, Statistics Canada said. That compares to 5.8% in the first quarter, a figure itself revised down from an originally estimated 6.1%.

The disappointing quarter makes Canada, one of the first Western nations to emerge from recession, the latest economy to see worrying signs of renewed weakness. In the U.S., economists have downgraded forecasts for this year and early next year amid poor home sales numbers and other weak economic data.

On a monthly basis, GDP expanded 0.2%, in line with market expectations, with gains in manufacturing, retail trade, utilities and forestry offset by declines in mining and oil and gas extraction, along with lower activity by real estate agents and brokers.

The weaker-than-expected growth comes a week before the Bank of Canada’s next rate-setting meeting, at which the bank was widely expected to raise its target for the key overnight rate by a quarter of a percentage point to 1.0%. The Bank of Canada has raised interest rates twice since June, and remains the only central bank of the Group of Seven industrialized nations to start tightening monetary policy again post recession.


TradingEconomics.com, WSJ
9/5/2010 2:10:39 PM