Canada pulls out of recession as growth resumes in third quarter

Tue Dec 1, 2015 10:02am EST
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By Leah Schnurr

OTTAWA (Reuters) - Canada pulled out of recession in the third quarter as an acceleration in exports revived growth, supporting expectations the Bank of Canada will be content to keep interest rates where they are for some time.

Gross domestic product increased at an annualized 2.3 percent rate last quarter, data from Statistics Canada showed on Tuesday. That was a tad shy of expectations for a 2.4 percent pace and slightly below the Bank of Canada's forecast of 2.5 percent.

The quarter also ended on a weak note as economic activity in September fell by a worse-than-expected 0.5 percent, driven by the decline in the oil and gas industry after a temporary production disruption.

But economists expect growth should pick back up in October, which will keep the Bank of Canada on hold when it makes its interest rate decision on Wednesday. The central bank cut rates twice this year to offset the impact of cheaper oil prices on the economy.

"Because the primary driver of the weakness in the September figures was a one-off factor, I don't see the Bank of Canada responding with any policy action," said CIBC Capital Markets economist Nick Exarhos.

The Canadian dollar weakened against the greenback immediately following the report. [CAD/]

Exports, a sector that is key to the central bank's outlook, climbed by an annualized 9.4 percent in the quarter, helped by an increase in shipments of goods including motor vehicles and consumer items. Exports of crude oil and crude bitumen also rose.

An increase in investment in residential construction and consumer consumption also contributed to economic growth, suggesting cheaper borrowing costs were having an effect.   Continued...

People walk down Bay St in the heart of the financial district in downtown Toronto December 7, 2009.    REUTERS/Mark Blinch