Canada's third quarter GDP growth may fall sharply

Sat Nov 24, 2012 9:22am EST
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By Claire Sibonney

TORONTO (Reuters) - Canada's economy likely expanded at a disappointing annualized rate of 0.9 percent in the third quarter, hurt by weaker demand for the country's exports and the drag of a rapidly cooling housing market.

The median forecast in a Reuters survey of 25 analysts was less than the Bank of Canada's already modest 1 percent forecast and well below what is needed to absorb the economy's unused slack.

Such a pace is likely to keep the central bank from raising interest rates anytime soon.

Just last month, a Reuters poll showed analysts were expecting third quarter growth of 1.7 percent. <ECILT/CA>

But forecasts fell sharply following a string of weak data releases. These showed a surprise contraction in August growth, fewer exports, a cooling housing market and temporary disruptions in the oil sector.

"International headwinds weighed heavily on Canadian economic output, with exports down 8.6 percent in the quarter, a third consecutive quarterly loss. Domestic demand was likely constrained by tighter mortgage insurance rules put in place on July 9," TD Bank economist Diana Petramala said in a research note.

In its October Monetary Policy Report, the Bank of Canada said it expected third-quarter growth of 1.0 percent, slashing its previous forecast of 2.0 percent. Growth in the second quarter was just 1.9 percent.

Only 11 of 25 economists in the Reuters survey saw third-quarter growth of at least 1.0 percent.   Continued...