Canada chalks up another quarter of weak growth
OTTAWA - Canada’s economy grew at a sluggish pace in the final quarter of 2012 after a similarly disappointing third quarter, resulting in the weakest six months since the 2008-09 recession, Statistics Canada data indicated on Friday.
The slowdown will likely add pressure on the Bank of Canada to keep stimulus in place for longer and weigh on the Conservative government as it prepares its next budget.
Gross domestic product expanded by 0.6%, annualized, Statistics Canada said, as inventory accumulation slowed sharply and the manufacturing sector retreated.
It was the worst performance since the second quarter of 2011, when the economy contracted 0.8% in the aftermath of the Japanese earthquake and tsunami. Excluding that extraordinary effect, the last time the economy fared worse was at the end of the recession in the second quarter of 2009, when it shrank 3.6 percent.
Statscan revised third-quarter growth to 0.7% from 0.6% previously.
The fourth-quarter figure was not a huge shock to markets, and was in line with forecasts after economist cut their targets in recent weeks after a spate of downbeat data.
“Even though it is no big surprise, even at the margin it’s a slight disappointment,” said Doug Porter, chief economist at BMO Capital Markets.
“As per usual, it’s a bit of a downside surprise to the (central) bank but nothing egregious, so I don’t think this alone will prompt them to shift their language,” he said.
The Bank of Canada has been signalling for months that it intends to raise interest rates but last month adopted a more dovish tone, saying such a move was “less imminent.”
Markets don’t expect any move by the bank at its interest rate decision next week. Global forecasters this week pushed back expectations for the central bank’s next rate hike to the first quarter of 2014.
The Canadian dollar pared some earlier losses after the data was released. The currency was trading at $1.0323 to the greenback, or 96.87cents US, compared with $1.0334 just before the GDP data was released and $1.0314 at Thursday’s North American close.
In December the economy shrank 0.2%, also matching forecasts, in the first monthly decline since February on weakness in manufacturing, retail trade and utilities.
Businesses stockpiled only about $5.7 billion in inventories in the fourth quarter, compared with $13.5 billion in the third period, Statscan said.
Consumer spending was the main driver of growth, increasing 0.7% for the second straight quarter. Business and government capital investment also increased and trade provided a slight boost.
The mining and oil and gas industries contributed most to growth in the quarter, partially offset by manufacturing.
In 2012 as a whole, Canada’s economy expanded 1.8%, down from 2.6%in 2011.