OTTAWA — Canada’s economy grew faster than economists forecast in the third quarter as exports of crude oil grew and consumers opened their wallets for cars and other big- ticket items.
Gross domestic product rose at a 2.8 percent annualized pace from July to September, Statistics Canada said Friday in Ottawa. While the gain exceeded all 21 forecasts in a Bloomberg economist survey with a median of 2.1 percent, growth slowed from the second quarter’s 3.6 percent expansion.
The world’s 11th-largest economy is making progress in what Bank of Canada Governor Stephen Poloz calls a needed rotation of demand to exports and business investment, which rose at the fastest pace in more than two years. Poloz’s view that substantial economic slack remains has been challenged by a jobless rate that’s fallen to a six-year low and inflation that rose above the 2 percent target earlier than the central bank forecast.
The report “will narrow the slack a little bit,” in the economy, Mazen Issa, senior Canada macro strategist at TD Securities in Toronto, said by telephone. The Bank of Canada “will maintain the cautious rhetoric” at its next rate decision on Dec. 3, he said.
Canada’s dollar remained lower after the report, and was 0.8 percent weaker at C$1.1422 at 11:53 a.m. Toronto time. Five- year government bond yields declined to 1.40 percent from 1.43 percent.
Exports grew at 6.9 percent annualized pace in the third quarter, led by crude, metals and chemicals, while imports increased 4.0 percent, Statistics Canada said Friday. Business gross fixed capital formation growth accelerated to a 5.9 percent pace from 3.2 percent.
Household spending advanced 2.8 percent, led by durable goods including automobiles and furnishings.
The expansion exceeded the central bank’s October estimate for third-quarter growth of 2.3 percent. Gross domestic product must expand by more than 1.9 percent to use up spare capacity and spark inflation, the bank has said.
On a monthly basis, Canada’s gross domestic product rose 0.4 percent in September following August’s 0.1 percent contraction, led by mining and oil and gas extraction. The increase matched economist forecasts in a Bloomberg survey.
“Canada is on the right track,” Finance Minister Joe Oliver said in a statement Friday, adding that “threats to the global economy loom.”
Friday’s report still shows Canada’s economy slowing while the expansion in the U.S., which buys three-quarters of Canada’s exports, chugs ahead. The world’s largest economy grew at a 3.9 percent annualized pace in the third quarter following a 4.6 percent rate in the prior period, marking the strongest six months of growth in more than a decade, the Commerce Department said Nov. 25 from Washington.
Canada’s expansion in the next few quarters may be curbed by a drop in prices for crude oil, one of Canada’s most valuable exports. Calgary-based Canadian Natural Resources Ltd. may delay its 50,000 barrel-a-day Grouse project scheduled to start in 2018 or 2019, President Steve Laut said earlier this month.
“The Bank of Canada will be completely unmoved because of one word: oil,” Doug Porter, chief economist at BMO Capital Markets in Toronto, wrote in a research note. Today’s faster growth signs will be blunted by the future drag on incomes, government revenues and inflation, he said.
In a separate report, Statistics Canada said the industrial product price index fell 0.5 percent in October, and the raw materials price index dropped 4.3 percent.
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