Canada indicators warm up view of 4th qtr growth

Thu Jan 20, 2011 10:42am EST
 
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By Leah Schnurr

OTTAWA (Reuters) - Two economic indicators released on Thursday suggested Canadian economic growth in the fourth quarter may come in a bit stronger than had been expected after some recent bearish figures.

Statistics Canada said wholesale trade rose 1.2 percent in November, advancing for the fourth month in a row. Statscan revised the October wholesale trade figure to a 0.3 percent rise, compared with a flat initial reading.

The statistics agency also said the composite leading indicator rose 0.5 percent in December, beating expectations for a 0.3 percent rise. It revised November's gain to 0.5 percent from the 0.3 percent rise it initially reported.

A rise in stock market prices and household spending lifted the leading indicator, though most manufacturing components weakened with new orders for durable goods down 1.7 percent.

The wholesale trade figure "does highlight a very small upside risk to both our and the Bank of Canada's tracking for annualized fourth-quarter real gross domestic product growth of 2.3 percent," David Tulk, chief Canada macro strategist at TD Securities, wrote in a note.

The Canadian dollar, which was trading at C$0.9995 just before the data, rose as high as C$0.9977 immediately after it was released.

Earlier this week, data showed factory sales unexpectedly declined in November, raising concerns about economic growth in the fourth quarter. Also, the Bank of Canada signaled that sluggish growth, partly a result of the Canadian dollar's strength, may spur it to keep interest rates on hold for longer than markets had expected.

"While sharply lower manufacturing sales will act as a drag, positive contributions from hours worked, trade, housing starts and now wholesale trade add to the argument that November GDP likely saw a gain," Derek Holt, economist at Scotia Capital, wrote in a note.   Continued...