November 30, 2018 / 1:59 PM / 14 days ago

Instant View: Canada's economy posts 2.0 percent annualized growth in third quarter

TORONTO (Reuters) - Canada’s economy grew at an annualized rate of 2.0 percent in the third quarter, in part due to higher export volumes and strength in mining and petroleum refineries, Statistics Canada said on Friday.

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Market reaction: CAD/

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PAUL FERLEY, ASSISTANT CHIEF ECONOMIST AT RBC

“Two (percent) is sort of in line with estimates. ... A bit more worrying, though, is the monthly detail showing an unexpected decline in September, setting us up for a fairly weak fourth quarter situation being compounded by the postal strike and the fall-off in oil prices.”

“In terms of impact on the Bank of Canada, the third quarter numbers would be in line with their forecast but a further weakening might be a bit less positive in terms of their outlook for the economy. However, I think it reinforces a gradual pace of tightening, dependent on the data and the extent of slowing that we see in the fourth quarter, and some sense of whether that slowing’s going to be sustained or whether it’s going to bounce back as we move into 2019.”

ANDREW KELVIN, SENIOR RATES STRATEGIST AT TD SECURITIES

“It is not a great batch of data. We did see a little bit more weakness from the oil patch in the September figures than we were expecting. We thought that would be more concentrated in October, so perhaps the negative print on the September industry level GDP number isn’t as negative as it looked at first glance.”

At the same time, if you look at the Q3 data as a whole, we had a big drawdown in business investment, we did see the deceleration in consumption activity, it’s not a great mix of data.”

“I do think if you are looking at this mix of data knowing that you are probably going to have a weak Q4, you do have to start asking questions about if the Bank of Canada is going to be able to throw caution to the wind a bit and lift rates in January or maybe they are going to want to wait a bit til March.”

DOUG PORTER, CHIEF ECONOMIST, BMO CAPITAL MARKETS

“The headline numbers are no surprise whatsoever. If anything, the quarterly number was a touch better than some expected, like the Bank of Canada.”

“September surprised a bit by declining 0.1 percent, which doesn’t give us a very good lead in to the 4th quarter... It wasn’t a big surprise but there was some notable softness in domestic spending, especially in business investment.

“I’d be shocked if the bank did anything with the rates next week... The issue is in January. The market is mostly assuming the bank will hike rates at that meeting. I continue to believe it’s a closer call than the market is priced for. Today’s news reinforces that message.”

Reporting by Nichola Saminather, Fergal Smith and Anna Mehler Paperny; Editing by Denny Thomas

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