Tuesday, December 6, 2011

Canada GDP growth forecast 2012

World Economic outlook - Canada GDP growth forecast 2012 : Bucking the trend of major economies, Canada checked in Wednesday with its strongest quarterly growth since the start of 2010. The Canadian economy grew at an annualized rate of 3.5 percent in the third quarter of this year, led by stronger exports and housing investment, said Statistics Canada.

Analysts had forecast growth of 3.0 percent after last quarter's decline in gross domestic product (GDP) of 0.5 percent. By comparison, real GDP in the United States grew at a 2.0 percent pace in the third quarter, and Europe may be in a recession.

Statistics Canada said growth in consumer spending slowed to 0.3 percent from 0.5 percent in the second quarter, despite a housing market surge. Canada's goods-producing and service industries both grew, led by the energy sector, as crude oil extraction more than recovered from a period of maintenance and production woes.

Notable increases were also seen in manufacturing, construction, wholesale trade and the transportation and warehousing sector. But business investment in plants and equipment fell for the first time since 2009.

Domestic demand has been slowing throughout 2011 compared with 2010.

However, exports jumped 3.4 percent in the third quarter after declining in the previous quarter. Two exceptions were a continued slide in automotive exports and a dip in forestry exports.

After weeks of steep declines, the S&P TSX Composite Index jumped almost 250 points in early trading, while the Canadian dollar gained slightly in value.

Finance Minister Jim Flaherty was in New York touting Canada's "fiscal and economic rigor" to investors.

"In spite of the widespread turmoil in world markets, I am confident that Canada is well positioned to respond effectively to possible shocks coming from the current global uncertainty," he said.

"Canada will continue to show the economic and fiscal leadership that helped us weather the global hardships we have already faced."

Others were not so bullish.

Economist Emanuella Enenajor of CIBC World Markets noted that the "big lift" in the third quarter came from a spike in exports while domestic spending lagged.

"While today's numbers surprised on the upside, given the prior quarter's contraction in GDP, the third quarter bounce back still leaves average growth over the last two quarters at a sub-two percent pace -- a tame underlying tempo," the economist wrote in a research note.

Ongoing global uncertainty led the International Monetary Fund to project a more moderate outlook for Canada for 2011 and 2012.

Weak demand for Canadian products, a strong Canadian dollar and a sluggish US economy were the main factors in scaling down the predicted growth rates to an average of two percent annually for 2011 and 2012.

These projections were in line with a Bank of Canada report predicting 2.1 percent growth in 2011 and 1.9 percent growth in 2012.

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