Heady November not seen as harbinger
Manufacturers enjoy solid month, but experts still expect slow growth in 2013
Canada’s economy picked up some steam in November, overtaking expectations, thanks in good part to a rebound in manufacturing.
But that late spurt is not likely to carry the economy much past the two-per-cent growth target expected by forecasters for all of 2012.
Gross domestic product grew 0.3 per cent in November, Statistics Canada said Thursday. Economists had expected a 0.2-per-cent increase, following a 0.1-percent advance the previousmonth and a flat September.
“It doesn’t change the soft underbelly to the fourth quarter last year. I think it does suggest momentum will pick up in the early part of this year,” said Derek Burleton, deputy chief economist at TD Economics.
Manufacturers — hard hit by a strong Canadian dollar, which squeezed exports — saw output expand 0.7 per cent in November after falling back by 0.9 per cent the previous month. Within that sector, the production of durable goods was up 0.9 per cent, led by primary metal and transportation equipment.
Non-durable goods output rose 0.5 per cent, as “growth in chemical, petroleum and coal products, as well as food manufacturing, outweighed declines recorded by manufacturers of plastic and rubber products, beverage and tobacco products, and textile, clothing and leather products,” the federal agency said.
Construction activity was unchanged in November, as a decline in residential building was offset, for the most part, by increased activity in the non-residential sector.
Growth in the Canadian economy has been slowing after an initially strong recovery coming out of the 200809 recession. In 2010, GDP by expenditure rose 3.2 per cent and by 2.6 per cent in 2011. Last year, however, Canada managed just 0.6 per cent annualized growth in the third quarter and likely advanced by between one per cent and 1.4 per cent in the final three months.
“Much like the U.S. had disappointing numbers in the fourth quarter appear to be setting the stage for a rebound in Q1, So we should get better growth to start off 2013,” said Burleton. “We’re still cautious given some of the big issues that still need to be resolved state-side,” such as deficit and fiscal spending issues.
According to the Bank of Canada’s most recent estimates, growth for all of 2012 will be limited to 1.9 per cent. Most forecasters now expect two per cent growth this year.
In its quarterly Monetary Policy Report, the central bank said growth should be around 2.7 per cent in 2014, with full economic capacity to be reached in the second half of that year. The weaker-than-expected economic growth — and low inflation — will likely keep the Bank of Canada from raising interest rates until 2014.