Canada: GDP expands in October
December 23, 2010
In October, GDP expanded 0.2% over the previous month in seasonally adjusted terms. The increase followed on a 0.1% contraction in September, but came in slightly below market expectations of a 0.3% increase. On an annual basis, GDP grew 3.3%, down from a 3.5% increase in September. As a result of the monthly acceleration, the trend continued to improve, as annual average growth stepped up from 2.1% in September to 2.6% in October. The monthly expansion was broad-based, as output increased in eleven of the 18 categories surveyed by Statistics Canada (Statcan). Mining, oil and gas extraction drove the expansion with a 2.4% increase over the previous month (September: -1.6% month-on-month). On the other hand, utilities experienced the largest decrease, contracting 1.5% over the previous month (September: +1.0% mom). Finance, insurance and real estate services, which account for more than 20% of GDP, expanded 0.2% in October. After peaking in the first quarter of 2010, economic activity has lost momentum, and the stagnant reading in October suggests that economic growth has continued to moderate in the final quarter of the year. However, recent income and payroll tax cuts in the U.S. should boost Canadian exports and provide a lift to GDP growth. The Central Bank expects quarterly GDP growth to reach 2.3% saar in the fourth quarter, which is in line with the Consensus Forecast. For the full year 2010, Canadian monetary authorities see the economy growing 2.9%. For 2011 and 2012, Central Bank projects GDP growth of 2.4% and 2.8% respectively.