Canada’s Economy Expands Faster than Estimated in the Second Quarter

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Canada’s Economy Expands Faster than Estimated in the Second QuarterCanada’s gross domestic product grew the most in nearly three years in the April-June quarter, boosted by increased exports and business spending. The economy grew 3.1 percent in the second quarter from a year earlier, Statistics Canada reported on Friday.

Economists surveyed by Bloomberg News had expected the economy to expand 2.7 percent. Exports grew 17.8 percent due to higher spending on automobiles, forest and farm products; while household spending rose 3.8 percent.

“I see some encouraging trends” said Mark Chandler, a Toronto-based head of fixed-income strategy at RBC Capital Markets. “The good things in the report certainly were the trade contribution, the household is strong.”

Business spending in machinery and equipment and non-residential buildings increased 0.9 percent after declining in the past two quarters. Household spending was driven by furniture, automobiles and clothing, said Statistics Canada.

In another report, Canada’s statistics office reported that the industrial product price gauge plunged 0.3 percent in July, while the raw materials price index dropped 1.4 percent.

Meanwhile, U.S. consumer sentiment jumped in August, indicating that Americans are getting more confident about the state of the economy as the labor market improves. The Thomson Reuters/University of Michigan final sentiment index increased to 82.5 compared with 81.8 in July.

However, more needs to be done to return the index to its pre-recession average of 89 in the five years through December 2007, and thus boost consumer spending, which contributes 70 percent of U.S. economy. This includes stronger wage growth and general improvement in the jobs market.

The Michigan confidence poll’s index of current conditions, which tracks how Americans view their personal financial situation, grew to 99.8 in August, the most in seven years. This compares with 97.4 in July. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com