Canadian economy exceeds growth expectations

But cooling housing market and high household debt may slow service sector growth

Statistics Canada is reporting the Canadian economy recorded its strongest performance in eight months in November, growing 0.4% on a month-over-month basis. This gain exceeded market expectations, and was the result of a strong performance by the services sector, as well as oil and gas drilling. Analysts said the rise in November output bodes well for a final fourth-quarter GDP annualized growth reading of 2.3%, which would match the Bank of Canada’s forecast. Other sectors did not do as well: manufacturing was on the decline, and construction also decreased. The Canadian dollar gained modestly after the data release, while yields on Canadian bonds increased slightly. “It’s a good number and going forward December’s GDP is expected to be supported by a significant recovery in manufacturing, which tends to suggest that Canada will exit 2010 while not necessarily like a lion, but some sort of domesticated feline nonetheless,” said Stewart Hall, economist at HSBC Securities Canada. TD economists believe this resurgence in the services sector may be short-lived: consumer demands appear to be cooling, and more stringent mortgage insurance rules may dampen the housing market and slow growth in the service sector and construction output through 2011.

National Post

Looking for more?

Get the Best of Maclean's sent straight to your inbox. Sign up for news, commentary and analysis.