The Canadian economy expanded just 0.6 per cent in the third quarter of 2012, falling just short of our already low expectations of 0.8 per cent growth. The economy was held back by the largest decline in exports since the second quarter of 2009, along with falling business and residential investment. On the plus side, household spending grew at its fastest pace so far in 2012.
While real GDP growth was rather weak last quarter, that weakness was anticipated
and growth is widely expected to pick-up in the fourth quarter. It is unlikely
that the disappointing third quarter will have much of an impact on the Bank of
Canada's interest decision on December 4th. Given a continuation of modest
growth and stable inflation, our expectations remain that the Bank will hold
its overnight target rate at 1 per through the remainder of 2012 before testing
the water with a 25 basis point increase mid-to-late 2013.
Copyright BCREA - reprinted with permission