Growth resumes in Canada but U.S. woes threaten

Fri Oct 29, 2010 10:49am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Louise Egan

OTTAWA (Reuters) - Canada's economic recovery picked up speed again in August after stalling in July, but third-quarter growth is still on track to be the weakest since the rebound began, according to figures released on Friday.

Statistics Canada said gross domestic product climbed 0.3 percent in August, bolstered by wholesale trade, manufacturing and oil and gas extraction. GDP shrank 0.1 percent in July, the first contraction in a year.

The August figure matched the forecasts from a Reuters poll, and supported market expectations that the Bank of Canada will keep its key interest rate on hold through early 2011 after three successive hikes earlier this year.

Canadian Finance Minister Jim Flaherty welcomed the August comeback, but said U.S. housing woes remain a threat, and economists also blamed a weak U.S. economy for the slowdown.

"At the end of the day, the Canadian economy just can't fight the gravitational pull of sluggish U.S. activity. End of story," said Doug Porter, deputy chief economist at BMO Capital Markets.

Canada ships three-quarters of its exports to the United States and its autos and timber industries are particularly vulnerable to swings in demand from the next-door giant.

U.S. growth rose an annualized 2 percent in the third quarter, not enough to chip away at high unemployment or change perceptions of more monetary easing from the Federal Reserve next week, U.S. data showed.

IMF WARNING   Continued...