Economy runs out of steam in October

Fri Dec 23, 2011 11:49am EST
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By David Ljunggren

OTTAWA (Reuters) - Canada's economy stalled in October after four consecutive months of growth, pointing to a fourth-quarter slowdown as increasing global uncertainty mutes expectations for next year.

Statistics Canada said on Friday that October gross domestic product was unchanged from September, matching the forecast of analysts who cited financial turmoil in Europe and a troubled U.S. economy as factors slowing Canada's economy.

"The Canadian economy has already exhibited signs of domestic demand fatigue - household balance sheets are stretched and will likely keep consumer spending subdued," said TD Securities strategist Mazen Issa.

Analysts said annualized fourth-quarter growth was unlikely to breach 2.0 percent, well below the 3.5 percent recorded in the third quarter.

Issa said subdued U.S. growth and sluggish Canadian exports meant "the first half of 2012 is expected to be tumultuous" and predicted the Bank of Canada would keep interest rates low the entire year.

Canada's currency slipped after the data, weakening to C$1.0190 against the greenback, or 98.14 U.S. cents, down from about C$1.0183, or 98.20 U.S. cents, immediately before the figures were released.

Statscan said output of goods-producing industries fell by 0.2 percent in October from September, cancelling out a 0.2 percent increase in the services sector.

The utilities sector dropped by 1.5 percent on lower demand for both electricity and natural gas, while mining and oil and gas extraction were off 0.2 percent. These declines offset a 0.3 percent gain in manufacturing.   Continued...