Canada expansion slows to 1.8% annual pace as growth of exports moderates
2012-03-02 16:52:03
Canada’s economic growth slowed in the fourth quarter as weaker foreign trade blunted gains in consumer spending and business investment.
Gross domestic product grew at a 1.8 percent annualized pace from October to December, matching economists’ forecasts, following a revised 4.2 percent third-quarter rate, according to data today from Ottawa-based Statistics Canada. Export growth slowed to 4.6 percent from 16 percent, while imports gained 2.2 percent following a 1.5 percent decline.
Growth in the world’s 10th-largest economy will remain below 2 percent in the first half of this year because of global financial strains and weak demand, according to a central bank forecast. Manufacturers are struggling with a currency trading near parity with the U.S. dollar while companies such Enbridge Inc. (ENB) benefit from global demand for energy.
“The challenge that we face as a country is our manufacturing base,” Jim Prentice, vice-chairman of Canadian Imperial Bank of Commerce, the country’s fifth-biggest bank, said in an interview yesterday in Toronto. He said companies facing a strong dollar and low interest rates need to “take advantage of other opportunities.”
Bank of Canada Governor Mark Carney will probably keep his policy interest rate at 1 percent -- where it’s been for almost 18 months -- in a March 8 announcement, according to an economist survey that predicts no move until the fourth quarter. Carney said he will show “flexibility” in setting monetary policy as the economy returns to its full output next year.
Canada’s dollar fell 0.2 percent to 98.76 cents per U.S. dollar at 8:35 a.m. One Canadian dollar purchases $1.01256.
Interest-Sensitive Growth
Parts of the economy that are sensitive to low interest rates supported economic growth in the fourth quarter. Consumer spending expanded at a 2.9 percent annualized pace, up from 1.8 percent in the third quarter, while business investment rose 6.3 percent, the eighth consecutive increase.
Growth was curbed as companies added to inventories at a slower pace, Statistics Canada said in its report. Stockpiles increased by C$6.45 billion in the quarter, down from a C$10.5 billion buildup in the July-September period. Government spending rose 0.1 percent in the fourth quarter.
On a monthly basis, Canada’s economy grew 0.4 percent in December, with half the gain coming from oil and gas extraction. Economists forecast a 0.3 percent increase according to the median of 24 responses in a Bloomberg survey.
Enbridge Inc., the largest Canadian pipeline company, said Feb. 17 that fourth-quarter profit rose as it raised rates for oil shippers and transported more natural gas.
Revision Higher
Statistics Canada today also increased its estimate of third-quarter growth to 4.2 percent from 3.5 percent.
The economy grew 2.5 percent last year following a 3.2 percent expansion in 2010 and a 2.9 percent contraction in 2009.
Canada ships three-quarters of its exports to the U.S., which two days ago reported growth at a 3 percent annual rate in the fourth quarter.
The head of Canada’s largest port said he’s seeing signs the economy will continue to be supported by commodity sales while manufacturing struggles.
“You really do see the strength in Canadian coal, potash, grain, forest products,” Robin Silvester, President of Port Metro Vancouver, said in an interview last month in Bloomberg’s Ottawa newsroom. Stagnant container imports suggest that factories aren’t “particularly strong” he said.