UPDATE 2-Canada economy slows in Q4 but still tops expectations

Tue Mar 1, 2016 9:06am EST
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By Leah Schnurr

OTTAWA, March 1 (Reuters) - The Canadian economy slowed substantially in the final quarter of last year as exports fell and businesses held back on investments, suggesting the country was still hurting from low oil prices.

Even so, the 0.8 percent annualized increase in gross domestic product in the fourth quarter topped both economists' and policymakers' expectations for zero growth in the quarter.

The third quarter was also revised up slightly to 2.4 percent annualized, Statistics Canada said on Tuesday, while growth in December was modestly better than expected with a pickup of 0.2 percent.

Canada's economy contracted in the first two quarters of 2015, marking a mild recession as it was hit by the drop in the price of oil, a major export. The renewed downturn in oil prices has raised concerns growth could remain weak this year.

"It gives a slightly better tone to 2016. But from a big picture view, I don't think it changes the landscape," said Doug Porter, chief economist at BMO Capital Markets.

With the fourth quarter stronger than the Bank of Canada's forecast for no growth, the report reinforced expectations the bank is likely on hold for now after cutting interest rates twice last year.

After the release of the economic data, traders nudged up their bets that the bank will keep rates at 0.50 percent when it meets later this month, while the Canadian dollar rallied against the greenback.   Continued...