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Canada’s 3rd quarter GDP numbers make for grim reading

As expected third quarter GDP growth in Canada was poor, annualized growth of 1.2% (against 5.8% in the first quarter), is nothing to write home about.  Moreover, in September itself GDP declined by 0.1%, which is far worse than expected and sets a difficult stage for the 4th quarter. 



Our initial estimate in December 2009 was for GDP growth of 3.2% for the year, based on solid natural resource prices (check), strong-ish Canadian dollar (check) and oil price in the $72-$75 range (check) what we underestimated was the impact of trade, exports were a massive drag in the 3rd quarter GDP numbers to the tune of 0.4% -- somehow we had anticipated that the U.S. economy would be doing better than it is.  The one single item of strength in the GDP figure is personal consumption which rose 0.9% (again in the quarter).  Housing was also a drag on the GDP number, not entirely surprising, since it was during all of 2009 and early 2010 such a massive contributor to Canada’s GDP growth.


The BoC target was 3% GDP growth for 2010, revised down from 3.7% in late 2009.  The reality is that although 3% for the year is achievable it is a difficult target, since it would imply a massive acceleration in the last quarter.  Since so much of Canada’s economy is dependent on exports a 2.1% GDP growth rate for the last quarter is a tall order (especially since September itself saw a negative print).

It seems that I was, after all, too bullish on the Canadian economy – and me who thought I was too bearish! 

(Source: StatsCan) 

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