"While this is certainly a welcome surprise, the Bank of Canada will need to see continued momentum before changing policy tack"
- Benjamin Reitzes, senior economist at BMO Capital Markets
The so-called loonie advanced to 1.04 against the greenback on Thursday, as a report from Statistics Canada said the economy expanded more than expected in August, on record extraction of natural gas and oil. Over the last month Canada has reported mostly disappointing fundamental data, while central bankers also slashed its economic outlook for the economy, estimating only modest economic expansion this year. Therefore, bets were high the economy would show a weaker-than-expected growth for August. While markets expected a 0.2% expansion, the nation's GDP grew by 0.3% to $1.59 trillion, down from a 0.6% growth recorded a month earlier. This figure means that quarterly growth is accelerating after it slowed to a 1.7% rate in the April-to-June period due to a drop in business investment and energy exports. This month, however, data showed the extraction of gas and oil soared 2.8% to a record $97.6 billion, while other industries made a more modest contribution over the corresponding period. Economic output most probably rose at 2% annualized pace in the third quarter, outpacing official estimate of just 1.8%.
Despite solid August's performance, other economic indicators are pointing at slow expansion, with inflation fluctuating close to the bottom of the Bank of Canada 1% to 3% target range, while reduced pace of job is indicating at weakness of labour market, businesses are remaining cautious over future outlook.
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