December 23, 2009 / 1:40 PM / in 8 years

Canada economy grows in October as recovery takes hold

OTTAWA (Reuters) - Canada’s economy grew for the second consecutive month in October, the first back-to-back gain since late 2007, in a sign that the recovery is slowly taking hold after a painful recession.

<p>A real estate sign is seen on front of a house in Toronto June 19, 2009. REUTERS/Chris Roussakis</p>

Gross domestic product grew by 0.2 percent in October, after a 0.4 percent increase in September. Canada officially emerged from recession in the third quarter, when the economy eked out annualized growth of 0.4 percent.

“The report does suggest that Canadian economic activity is beginning to pick up steam in the fourth quarter,” said Millan Mulraine, an economics strategist at TD Securities.

Market operators had predicted 0.3 percent October growth, but they noted that October marked the first time since November 2007 that the economy had posted consecutive monthly GDP gains of at least 0.1 percent.

Jonathan Basile, vice president economics of Credit Suisse Securities, said the figures were “a sign the economic recovery is building some steam”.

The Canadian dollar initially rose slightly, but by 10:25 a.m. it had slipped to C$1.0520 to the U.S. dollar, or 95.06 U.S. cents, compared to C$1.0509 to the U.S. dollar, or 95.16 U.S. cents, shortly before the data were released.

Statscan said production increased in most major sectors in October, with business for real estate agents and brokers up 7.2 percent on a buoyant resale market.

Finance Minister Jim Flaherty said this week he would step in if necessary to try to cool a housing market that is benefiting from record low interest rates.

The manufacturing sector, hit by both the economic crisis and a strong Canadian dollar, was unchanged in October after a 1.0 percent month-on-month increase in September. Mining and oil and gas extraction fell by 0.4 percent.

“This is a classic glass-half-full/half-empty report. The half-full portion is that the economy ... is emerging from the recession,” said Doug Porter, deputy chief economist at BMO Capital Markets.

“The half-empty portion is that the recovery remains lackluster, at best, with GDP continuing to offer mostly surprises on the low side.”

The Bank of Canada last week said it was increasingly concerned that Canadians might be taking on too much debt, thanks to record low interest rates.

The central bank has promised to keep its key rate unchanged at 0.25 percent until next June, as long as it can keep inflation under control.

“Given the tentative start to the recovery, our forecast assumes that the Bank of Canada will maintain its conditional commitment,” said Dawn Desjardins of RBC Economics Research.

Reporting by David Ljunggren; editing by Janet Guttsman

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