Canada's economy likely stalled in October after third-quarter beat

By Ismail Shakil and Fergal Smith

OTTAWA, Nov 29 (Reuters) -

Canada's economy performed much better than expected in the third quarter, but an early indication that growth stalled in the fourth quarter could prompt the Bank of Canada next week to slow its campaign to hike interest rates.

Canada's economy grew at an annualized rate of 2.9% in the third quarter, above expectations, while GDP most likely was unchanged in October after a 0.1% gain in September, Statistics Canada data showed on Tuesday.

Analysts surveyed by Reuters had expected third-quarter annualized growth of 1.5% and a gain of 0.1% in September.

"The headline beat on Q3 GDP looks like a bit of a head fake," said Royce Mendes, director and head of macro strategy at Desjardins, pointing to a reliance on external demand and volatile categories.

Third-quarter final domestic demand fell 0.6%.

"Moreover, the monthly data suggest that the economy began the fourth quarter on weak footing. As a result, we continue to see the Bank of Canada hiking rates only 25 basis points next week," Mendes said.

The Canadian central bank raised rates by 50 basis points last month, lifting its policy rate to 3.75%, the highest since January 2008. It also forecast growth would stall from the fourth quarter this year through the middle of next year.

Money markets are betting on a 25-basis-point increase on Dec. 7, with a roughly 25% chance of a larger move. 0#BOCWATCH

Quarterly growth was driven by a rise in exports, non-residential structures, and business investment in inventories, Statscan said, adding that declines in housing investment and household spending were moderating factors.

Exports were up 2.1%, rising for the second consecutive quarter, led by crude oil and bitumen, and farm and fishing products. Imports fell 0.4% in the third quarter, reflecting widespread declines in energy products, including crude oil, natural gas, and nuclear fuel.

The Canadian Dollar CAD= touched its weakest level in nearly three weeks at 1.3557 to the greenback, or 73.76 U.S. cents, after the GDP data, down as much as 0.4%.
Reporting by Ismail Shakil in Ottawa and Fergal Smith in Toronto; Additional reporting by Maiya Keidan and Dale Smith; Editing by Paul Simao

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.