OTTAWA (Reuters) - Canada’s economy grew for a seventh month in a row in August, its longest stretch of expansion for more than a year, but analysts said the Bank of Canada was under little pressure to raise interest rates again next month.
Statistics Canada said on Wednesday that GDP in August edged up by 0.1 percent. Analysts in a Reuters poll had predicted no change from July.
The last time the country enjoyed such a long, unbroken streak of growth was during the nine months from November 2016 to July 2017.
If GDP is flat in September, annualized third-quarter growth should be about 1.8 percent, matching the central bank’s latest forecast.
The central bank, which last week raised rates for a fifth time since July 2017, reiterated Tuesday that more hikes would be needed to handle an economy operating near full capacity, with jobless levels hovering around 40-year lows.
The bank is due to announce rate decisions in both December and January.
“So as long we keep getting growth around that 2 percent rate, it still means the Bank of Canada is probably going to continue hiking interest rates gradually,” said Nathan Janzen, senior economist at Royal Bank of Canada.
Market expectations of an interest rate hike on Dec 5, as reflected in the overnight index swaps market, dipped slightly to 33.88 percent from 34.21 percent.
In a Reuters poll released on Wednesday, analysts forecast that the Bank of Canada would raise interest rates three times next year, but would do nothing in December.
Statscan said the oil and gas extraction sub-sector increased by 1.9 percent in August as total crude output in the oil-rich province of Alberta hit a record high. The finance and insurance sector posted a 1.0 percent gain.
The manufacturing sector contracted 0.6 percent, in part because of a 1.9 percent drop in motor vehicle assembly after atypical shutdowns at some auto plants. Overall, 12 of the 20 industrial sectors posted declines.
“Rates will eventually need to (rise) ... all in good time of course. No urgency is required on that front, as this so-so growth report suggests,” said Doug Porter, chief economist at BMO Financial Group.
Separately, Statscan said Canadian producer prices edged up 0.1 percent in September from August on higher prices for chemicals and energy and petroleum products. Analysts had predicted no change.
Raw materials prices fell 0.9 percent on less demand for conventional fuel oils.
Additonal reporting by Fergal Smith in Toronto, Ross Finley in London and Mumal Rathoer in Bengaluru; Editing by Bernadette Baum