"It sets up the fourth quarter to show above-potential growth again. It's not suggesting the transitioning from consumers to exports is playing out in a big way."
- Paul Ferley, assistant chief economist at Royal Bank of Canada
Canadian policymakers were disappointed with growth figures in the second half of the year, but the stronger-than-expected August GDP data fuelled hopes for a solid growth in the third quarter. Hence, after Statistics Canada revealed surprisingly good GDP figure, investors rushed to buy the Loonie, pushing USD/CAD 0.14% higher to 1.0564.
Gross domestic product increased at a 2.7% annualized pace totalling $1.70 trillion from July to September, accelerating from a revised 1.6% growth in the prior three months. The figure surprised markets on the upside, as analysts expected a figure of 2.5%. The expansion was led by a 0.6% growth in household consumption, with positive numbers seen in both the goods and service sectors. At the same time, business investments in non-residential buildings jumped 0.5%, as the economy has finally recovered from a construction strike in Quebec in the second quarter.
While exporters are still lagging behind other sectors, with shipments of both goods and services falling 0.5%, the economy is likely to continue gaining momentum. Hence, the central bank predicts amelioration of the economic conditions through low borrowing costs and a recovery of the consumer and business confidence to the rate of 2.4% and 2.6% next year and in 2015, respectively.
© Dukascopy Bank SA