Economy beats expectations with 4.5% growth

Sep 01, 2017, 01:53
Economy beats expectations with 4.5% growth

And that was before Thursday's release of GDP data from Statistics Canada, which showed Canada's economy expanded by a very strong 4.5 per cent, annualized, in the second quarter of 2017.

And as we noted when the original second-quarter number was reported a month ago, the growth in the second quarter was likely more attributable to Obama administration policies than Trump's since the current president hasn't been in office long enough to have had a measurable effect on the economy. "The expectations for an interest rate hike in December are a little bit larger "Wednesday", says Chris Low".

In terms of Q3 growth, CIBC still calls for expansion of closer to 2%, "with export and inventories among the categories likely to weigh on that quarter's pace, and housing turnover remaining slower than it had been earlier in this cycle". Thus, a cursory read of the data would suggest that the economy continues to plod along on a 2-precent growth path, consistent with what we have seen for years.

Zandi is forecasting that growth in 2018 will be an even stronger 2.8 percent.

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Growth in the second quarter was "above the trend for the expansion" but came "after a below-trend pace" in the first quarter, said Jim O'Sullivan, chief US economist at High Frequency Economics, in a note to clients. "And while it was once again consumers in the driver's seat, another strong quarter of income growth meant that households were able to increase their savings rate a touch while still keeping their wallets open". It's more than double the pace of the first three months of 2017 and better than original estimates for the second quarter.

GDP growth exceeded 3% in four quarters on a year-over-year basis, though it never grew 3% over a calendar year.

The U.S. dollar softened against a basket of currencies following lackluster U.S. economic data that failed to boost expectations for another Federal Reserve rate increase this year.

The U.S. economy rebounded sharply in the spring, growing at the fastest pace in more than two years amid brisk consumer spending on autos and other goods.

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The Canadian dollar strengthened against the United States dollar and traders raised bets for another 25-basis-point rate hike that could come as soon as next month. The report said 14 of 20 industrial sectors saw growth in June.

The report also showed strength in business investment. Increased business spending also helped lift the latest estimate above the Commerce Department's initial reading of 2.6 percent for the quarter.

The pickup in business investment "reflects two important factors", said Stephen Stanley, chief economist at Amherst Pierpont Securities, in a note to clients. Second, businesses are starting to more aggressively spend on equipment.

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