Canada: GDP expands in August
October 29, 2010
In August, gross domestic product expanded 0.3% over the previous month in seasonally adjusted terms. The increase followed on a flat monthly reading in July (previously reported: -0.1% month-on-month), but matched market expectations. On an annual basis, GDP expanded 4.1% over the same month last year, up from a 3.8% increase in July. As a result of the monthly acceleration, the trend continued to improve, as the annual average growth jumped from 0.9% to 1.5% in August. The monthly expansion was broad-based, as output declined in only four of the 18 categories surveyed by Statistics Canada (Statcan). Manufacturing production, which alone accounts for 13% of GDP, drove the monthly rise by expanding 0.5% over the previous month (July: -0.5% mom) as it is less dependent on domestic demand. On the other hand, the agricultural sector experienced the largest decrease, contracting 0.6% over the previous month, following on a 2.2% drop in July. After having peaked in the first quarter, economic activity has been losing momentum since the beginning of the second quarter. In part, the subdued performance reflects the monetary tightening implemented by the Bank of Canada (BoC) this year. In addition, the withdrawal of measures to boost the housing sector in April and the weakness of the external demand accounted for softer economic growth. The Central Bank expects annual GDP growth to reach 3.6% in the third quarter, which is broadly in line with the Consensus Forecast. For the full year 2010, Canadian monetary authorities see the economy expanding 3.1%, followed by a 2.3% expansion in 2011, and 2.7% in 2012. Consensus Forecast panellists share the Bank's assessment and anticipate GDP adding 3.1% this year, which is down 0.1 percentage points over last month's estimate. In 2011, the panel expects the economy to expand 2.6%.