Canadian economy grows more than expected in Q4 2010
Posted: Feb 28 2011 Topic:
Canada’s economy expanded more than expected in the fourth quarter on 2010, led by strong exports and consumer demand, Statistics Canada reported Monday.
The improved economic performance points to a possible increase in the Bank of Canada’s key interest rate in the coming months.
Gross domestic product grew by an annualized paces of 3.3 per cent during the October-to-December period, the federal agency said. During the month of December, the economy advanced 0.5 per cent.
Economists had expected growth of three per cent in the fourth quarter, following a 1.8 per cent rise in the previous quarter, revised from one per cent. The average forecast for December was between 0.2 and 0.3 per cent after growth of 0.4 per cent in November.
The Canadian dollar was trading around 102.67 cents U.S., up from Friday’s close of 102.18 cents U.S..
“Higher demand for exports (up four per cent) contributed the most to the fourth-quarter growth in GDP,” Statistics Canada said. “Final domestic demand expanded as consumer spending increased 1.2 per cent. In particular, purchases of durable goods grew 2.9 per cent, far outpacing the third-quarter growth of 0.6 per cent.”
Business investment in plant and equipment increased 2.5 per cent in the October-to-December period, its fourth consecutive gain. The main contributor was a 4.9 per cent increase in investment in non-residential structures.
For all of 2010, Canada’s GDP grew 3.1 per cent, following a 2.5 per cent decline in 2009.
Avery Shenfeld, chief economist at CIBC World Markets, said “the last quarter of the year erased the disappointment of a sluggish summer, and points to a healthy start to the new year.”
Bank of Canada governor Mark Carney recently said he expected fourth-quarter growth to exceed the 2.3 per cent pace originally forecast by the central bank.
The GDP report comes ahead of Tuesday’s monetary policy meeting of the Bank of Canada. Economists are calling for the bank to keep its key lending rate steady at one per cent.
“Look for a more hawkish line from the Bank of Canada tomorrow that sets the stage for a rate hike in Q2,” Shenfeld said.
However, the central bank might make reference on Tuesday to recent political events in the Middle East and North Africa, which has driven up oil prices and sparking fears of a global economic slowdown.