Canadian economic growth decelerates in Q3 2017, on decline in net trade

The Canadian economic growth decelerated in the third quarter from the robust pace seen in the prior quarter. Canada’s economy expanded 1.7 percent sequentially, as compared with the second quarter’s revised rate of 4.3 percent. The overall price growth was effectively flat, leaving the nominal GDP up 1.8 percent in the third quarter.

Net trade was the most considerably headwind to the growth. It negatively contributed 3.3 percentage points from the headline figure. Exports dropped 10.2 percent, while imports fell a more modest 0.2 percent. Most of the weakness on the export side can be linked to motor vehicles and parts.

Residential investment also negatively contributed to the headline figure for the second consecutive quarter, dropping 1.4 percent. The fall was mainly due to ownership transfer costs that dropped 17.4 percent. Construction activity rebounded on the quarter, rising 6.8 percent.

Meanwhile, consumer spending continued to be positive overall, as household spending grew 4 percent, underpinned by sound gains in durables and services spending, which grew 4.2 percent and 5.3 percent, respectively.

Household spending throughout major categories stayed healthy with the exception of household furnishings and related goods/services – likely reflecting the deceleration of resale activity. Non-residential business investment continued to grow, rising 3.7 percent. Strength was observed in non-residential buildings, while engineering structures investment pulled back modestly after two quarters of growth. Machinery and equipment investment rose 6.1 percent due to sound industrial machinery investment, while intellectual property investment grew 2.6 percent.

Government stimulus also seems to be moving into higher gear as government investment grew 13.4 percent, contributing 0.5 percentage points to the headline figure, noted TD Economics.

“In terms of the interest rate outlook, still healthy consumption growth and solid aggregate income gains (which are likely to continue given the dynamite November jobs figures also released this morning) will help 'tick the boxes' in terms of the Bank's key areas of focus”, stated TD Economics.

At 18:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was slightly bullish at 54.8727, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -73.1172. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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