March 2, 2018 / 2:08 PM / 4 months ago

Instant View: Canada's economy grew 1.7 percent annualized in fourth quarter

TORONTO (Reuters) - Canada’s economy grew at an annualized rate of 1.7 percent in the fourth quarter on the strength of business investment and residential structures, Statistics Canada said on Friday. Exports rose over the quarter after a drop in the previous quarter. Declines in goods-producing industries helped slow December’s GDP growth to 0.1 percent.

LINKS: www.statcan.ca/start.html

Story:

Market reaction: CAD/

COMMENTARY:

PAUL FERLEY, ASSISTANT CHIEF ECONOMIST AT ROYAL BANK OF CANADA

“The data came in fairly close to expectations, continuing to show Canadian growth slowing close to the economy’s potential over the second half of last year.”

“In some ways this slowing, it’s not unwanted. With the economy at capacity you want that growth rate to start moving closer to potential.”

“It is a little bit weaker than the 2.5 percent (growth) that they (the Bank of Canada) last projected for the fourth quarter, so it is not going to imply any urgency to continue to tighten. But they are going to make sure this more moderate growth rate is maintained, so eventually I think you will see further tightening by the Bank of Canada.”

DOUG PORTER, CHIEF ECONOMIST, BMO CAPITAL MARKETS

“There’s no big surprise here, but generally speaking, it looks to be slightly on the low end of expectations, especially when you take the mild downward revision to the third quarter into account as well.”

“But for all intents and purposes, this is pretty much as close to consensus as one could reasonably expect, whether we’re talking about the month or the fourth quarter. I think from a bigger picture standpoint, the rush of growth we had from the middle of 2016 to the middle of 2017 is now well and truly over and the economy is settling back into a growth path closer to potential, or likely just around 2 percent or so.”

ANDREW KELVIN, SENIOR RATES STRATEGIST AT TD SECURITIES

“We were looking for the deceleration in growth just relative to first half of 2017. We saw consumption decelerate but it remains at a fairly healthy pace. There was a big boost in residential investment which is unlikely to be sustained going forward.”

“All in all it is just consistent with an economy that is seeing growth converge back to its trend pace and is again consistent with a more gradual pace of Bank of Canada tightening than is perhaps priced by the market.”

Reporting by Fergal Smith and Susan Taylor; Editing by Denny Thomas

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