Canada’s Economy Expands Faster than Forecasted amid Low Crude Prices

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Canada’s Economy Expands Faster than Forecasted amid Low Crude Prices The Canadian economy expanded quicker than projected in the fourth quarter after businesses added stocks for sale and customers spent more.

Statistics Canada reported Tuesday that gross domestic product expanded by 2.4 percent in the October-December period. The Ottawa-based agency al
so revised growth in the third quarter to 3.2 percent, up from the previous estimate of 2.8 percent. Economists in a Bloomberg News survey had expected the GDP to expand 2.0 percent in the fourth quarter.

Analysts are keenly awaiting Wednesday’s meeting by Bank of Canada policy makers, which may result in a further interest rate adjustment. Recently, in Jan. 21, BOC Governor Stephen Poloz surprised markets by slashing interest rates; something he said was necessary to prevent shocks to the economy due to falling crude oil prices.

“It sets him up to stay on hold Wednesday,” Robert Kavcic, a Toronto-based Bank of Montreal senior economist, told Bloomberg. “We just haven’t had the full impact of lower oil prices filter through the economy yet and the central bank is going to stand aside and see how the first quarter plays out.”

The Canada’s dollar appreciated up to 0.8 percent to trade at C$1.2435 versus the U.S. dollar after the report was released.

Much of the growth in the fourth quarter was driven by companies, which stockpiled inventories worth C$7.36 billion. Exports fell 1.6 percent, the first time they fell in a quarter in two years, while business gross capital formation declined 0.4 percent. Consumer spending accelerated 2.0 percent, mostly due to spending on transportation items. However, the growth was weaker than the 2.6 percent and 4.6 percent posted in the third and second quarter respectively. 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