Consumer spending, exports underpin Canada's second quarter GDP recovery

Fri Aug 29, 2014 11:21am EDT
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By Randall Palmer

OTTAWA (Reuters) - Strong consumer spending and a jump in exports helped the Canadian economy bounce back from a weather-restrained first quarter, with annualized growth of 3.1 percent in the second quarter after a downwardly revised 0.9 percent in the first.

The Statistics Canada data on Friday showed gross domestic product growing at its fastest pace since the third quarter of 2011, beating the Bank of Canada's July forecast of 2.5 percent and exceeding market expectations of 2.7 percent.

First-quarter growth was originally reported at 1.2 percent.

Second-quarter growth was shy of the 4.2 percent GDP expansion reported in the United States this week. For the first six months of 2014, Canada's economy grew at a faster clip because, while both countries were hurt by bad weather, the U.S. economy shrank in the first quarter.

Analysts saw some encouraging news in the recovery, especially the contribution being made by exports, long an under-performer, as well as above-expectation growth of 0.3 percent for June from the month before.

But Bank of Montreal chief economist Doug Porter pointed out that growth averaged only 2 percent for the first two quarters, close to what the central bank sees as potential growth, suggesting slack was not taken up during the first half.

"So they will look at first and second quarter overall and not be overly impressed. I'm sure it gives them a bit of comfort that the economy rebounded from a sluggish start to the year, but I don't think this one report is going to tilt the balance heavily at the Bank of Canada," he said.

Net exports contributed 1.76 percentage points to the annualized growth rate in the second quarter, with households contributing 2.04 points.   Continued...

People go shopping in a mall in downtown Toronto, December 23, 2008. REUTERS/Mark Blinch