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Financial Post -Canada ‘in the sweet spot’ as exports, consumer spending boost economy to fastest growth in almost three years
Friday, 29 August 2014
OTTAWA — The strong second-quarter performance of the Canadian economy provides a welcome reality check after a chilly start to 2014.
Consumers still underpinning growth: Check. Exports and business investment picking up: Check. U.S. expansion back on track: Check. Interest rates at ultra-low levels: Check, for now.
All tallied, not a bad way to kick off the second half of the year.
Gross domestic product climbed at an annualized pace of 3.1% between April and June, the strongest performance since a 6.2% annualized jump in the first quarter of 2012, Statistics Canada said Friday.
That second-quarter rise was considerably better than the 2.7% that most analysts had expected.
If there was a downside, it would be the federal agency’s revision of first-quarter economic output — to 0.9% from an original estimate of 1.2%. And the fact that business investment, though recently positive, still isn’t nearly as strong as it needs to be to lift the biggest burden for growth off the shoulders of consumers.
Even so, we can blame the severe winter conditions for much of the disruption here and south of the border during the first part of the year — along with unsteady economic signals out of Europe — and move on.
To hear the country’s finance minister tell it, we already have.
“Canada is on the right track,” Joe Oliver said after the release of Friday’s GDP report. “And we will stay on track, to a balanced budget in 2015, and tax relief that puts more money back into the pockets of hard working Canadian families.”
There’s no denying the Canada economy is turning around — with growth above the Bank of Canada’s own second-quarter forecast of 2.5% — as is the United States, which added an even more impressive 4.2% in the second quarter, after going into reverse during the previous three months.
“The big story in both countries is that after a struggling start to the year, both economies rebounded with purpose in the spring,” said Douglas Porter, chief economist at BMO Capital Markets.
“We could see more of the same in the third quarter. It looks like the Brent Lewin/Bloomberg business investment following through…. There’s no doubt that there’s still be quite a bit of caution among businesses,” Mr. Porter said.
“Fortunately enough, filling that void was the consumer, and housing had a nice quarter,” he added. “Both are coming back for either sluggish or weak first quarters.”
Meanwhile, for June alone, Statistics Canada said GDP was up 0.3% — above forecasts of 0.2% — after an upwardly revised 0.5% rise the previous month. The federal agency had previously estimated the May increase at 0.4%, following an advance of 0.1% in April.
Mr. Wills cautioned the economy still faces threats from outside the country.
“In Europe, German retail sales were awful and CPI data for the eurozone for the whole was flat,” he said, “and there’s geopolitical tension right on their doorstep as well.”
From: The Financial Post
