Canada Economy Slowed in Third Quarter on Exports - Nov. 2012


Canada’s economic growth slowed to a 0.6 percent annualized pace in the third quarter as consumer spending gains were blunted by the fastest export decline since the end of the last recession and falling business investment.

The gain in gross domestic product for July to September was the slowest in more than a year and lagged the 0.8 percent median forecast in a Bloomberg News economist survey with 26 responses. Statistics Canada today also cut its second-quarter figure to 1.7 percent from 1.9 percent in a report from Ottawa.

The world’s 11th largest economy relies on exports for a third of output and is being hobbled by renewed global strains such as Europe’s debt crisis, slowing Chinese growth and possible U.S. budget cuts. Finance Minister Jim Flaherty this month increased his deficit forecasts on lower commodity prices while Bank of Canada Governor Mark Carney said Oct. 24 the case for raising his 1 percent policy rate is “less imminent.”

“It’s a weak report, especially relative to the U.S.,” which yesterday reported growth of 2.7 percent at an annual pace in the three months through September, said Benjamin Reitzes, an economist at BMO Capital Markets in Toronto. “There’s no momentum as we move into the fourth quarter.”

Exports of goods and services dropped 7.8 percent, the fastest since the second quarter of 2009, Statistics Canada said today. Business gross fixed capital spending fell 2.2 percent in the third quarter.

Canada’s currency declined 0.1 percent to 99.36 cents per U.S. dollar at 8:54 a.m. in Toronto. It touched 99.06 cents on Nov. 27, a three-week high. One Canadian dollar buys $1.0061.

Government bonds rose, pushing the benchmark 10-year yield one basis point lower to 1.70 percent as the price of the 2.75 percent security due in June 2022 gained 9 cents to C$109.25.

Exporter confidence has declined on concerns about the global economy and Europe’s debt crisis, Canada’s trade- financing arm said yesterday. Export Development Canada said its index fell to 70.7 from the previous reading of 75.9, based on a survey with 797 responses taken in September and October.

Bank of Canada Governor Mark Carney has forecast the slowest recovery in exports since World War II on weak global demand, a strong Canadian dollar and the need for companies to regain competitiveness.

The central bank’s forecast last month said that Canada’s recovery through 2014 will be led by consumption and business investment as a strong dollar restrains exports.

Household consumption was the main driver of economic growth in the third quarter, accelerating to a 3.8 percent annualized pace from 0.6 percent in the prior three months.

The other major source of growth came as businesses spent C$12.1 billion to increase their inventories, up from C$5.86 billion in the second quarter, according to Statistics Canada figures.

Imports rose 1.7 percent, the fourth consecutive gain, led by travel services and chemicals, plastics and rubber.

On a monthly basis, Canada’s gross domestic product was unchanged in September, following a 0.1 percent decline in August. Economists forecast a 0.1 percent expansion for September based on the median of 22 responses in a Bloomberg survey.

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