Canada: Economic growth slows in third quarter
November 30, 2010
In the third quarter, gross domestic product (GDP) added 1.0% in seasonally adjusted annualised terms, undershooting market expectations, which had seen GDP expanding 1.4%. The reading, which was half the 2.0% expansion recorded in Q2 represents the second consecutive quarter of decelerating economic growth. The domestic sector remained strong, as growth in private consumption accelerated to 3.5% (Q2: +2.1% saar) and business fixed investment expanded 9.4%, after having grown 13.1% in the second quarter. The weak third quarter reading was led by a slowdown in the external sector, as exports contracted 5.0% contrasting the 5.0% growth experienced in the second quarter while imports grew 6.4% in the third quarter (Q2: +19.0% saar). The net contribution from the external sector to overall economic growth improved somewhat from a 5.6 percentage-point detraction in the second quarter to a 4.2 percentage-point decrease in the third quarter. Due to the weak economic growth experienced in the third quarter, the Bank of Canada decided to maintain interest rates at 1.00% at its latest monetary policy meeting held on 7 December. The move was not unexpected with the Bank likely to put policy tightening on hold unless the economic recovery is more pronounced in the months to come.