The Canadian
economy contracted 0.1 per cent in August, following 0.2 per cent growth in
July. Declining industry output was registered mainly in the goods production
sector due to weakness in mining and oil and gas extraction and manufacturing.
Declines were also registered in utilities and construction. Output in the
services sector was unchanged as increases in wholesale trade, transportation
and the public sector were offset by declines in real estate activity, retail
trade and finance and insurance.
Our updated third quarter GDP tracking estimate is currently reading just 1 per
cent growth, in-line with the Bank of Canada's most recent forecast. Therefore,
while the economy underperformed in the third quarter, that weakness was
expected and so will not move the Bank off of its rate tightening bias.
We are forecasting that the Canadian economy will grow at a modest pace of
about 2.0 per cent this year followed by 2.1 per cent growth in 2013.
This moderate growth and low inflation combined with lingering global economic
uncertainty will continue to keep the Bank of Canada on hold until mid-to-late
2013.
Copyright BCREA Reprinted with permission
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