Canada: Economy slows down on external sector deterioration
February 29, 2012
In the fourth quarter, GDP increased 1.8% in seasonally adjusted annualized terms over the previous quarter. The result was down from the revised 4.2% expansion recorded in the third quarter (previously reported: 3.5% quarter-on-quarter saar) but came in virtually in line with last month's Consensus Forecast of a 1.9% increase. The deceleration over the previous quarter was entirely caused by a deterioration in the external sector, as domestic demand expanded at a stronger pace than in Q3. Private consumption picked up from a 1.8% increase in the third quarter to a 2.9% rise in the third, while business fixed investment accelerated from a 5.2% expansion in the third quarter to a 6.3% rise. Meanwhile, exports of good and services decelerated sharply, expanding only 4.6% in the fourth quarter (Q3 2011: +16.0% qoq saar). Imports, on the other hand, bounced back from a 1.5% contraction in the third quarter to a 2.2% increase. As a result, the contribution from net exports to overall economic growth fell from 4.2 percentage points in the third quarter to just 0.5 percentage points in the fourth. For the full year 2011, GDP expanded 2.5%, which was down from the 3.2% growth rate observed in 2010. The Central Bank projects the economy to grow 2.0% in 2012 and 2.8% in 2013.