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article imageCanada's economy grew less than expected in last half of 2017

By Karen Graham     Mar 2, 2018 in World
Ottawa - Canada's economy slowed down in the fourth quarter of 2017, bringing to an end the surge in growth seen in the first half of last year, signaling the economy is settling into a growth path that is closer to potential.
The report from Statistics Canada on Friday was expected to keep the Bank of Canada from possibly rising interest rates at their meeting next week, although the central bank is still looking to raise borrowing costs later this year, according to the Financial Post.
However, Canada's gross domestic product (GDP) grew by an annualized 1.7 percent in the last quarter of 2017, below the expected 2.0 percent growth rate. The Canadian dollar tied with the Mexican Peso as the worst performing major currency last month and was one of the worst performing currencies for the last six months.
The report also revised the figures for the third-quarter growth rate in 2017, revising them down to 1.5 percent, compared to the initial estimate of 1.7 percent. This means the Canadian economy grew 3.0 percent for the year, its best performance since 2011, according to Statistics Canada.
“The rush of growth we had from the middle of 2016 to the middle of 2017 is now well and truly over,” said Doug Porter, chief economist at BMO Capital Markets. “The economy is settling back into a growth path closer to potential, or likely just around 2 percent or so.”
Porter noted that “With trade uncertainties mounting and inflation still reasonably well behaved, this gives the Bank of Canada plenty of leeway to stay cautious. We continue to expect the Bank to move to the sidelines until the second half of this year.”
Many analysts are pointing to the exaggerated fourth-quarter GDP figures brought about by spending on residential structures. Spending in this sector grew in the last three months of 2017 to an annualized 13.4 percent, the strongest quarterly increase since 2012, brought about by the new mortgage qualification rules that took effect on January 1.
This increase in residential spending accounted for fully 1.0 percent of the 1.7 percent growth rate in the last quarter of 2017. However, consumption growth was the lowest since 2017, due in part to a higher consumer saving rate that grew to 4.2 percent in the fourth-quarter, up from 4.0 percent in the third.
More about Canada, GDP, Economy, potential growth level, Free trade
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