Tuesday , June 28 2022

The Canadian economic growth weakens as decreasing business investment and consumers spend less



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OTTAWA – The pace of economic growth in Canada slowed in the third quarter because the cost of business & # 39; decreased investment and growth in household spending slowed, and raised questions about the future step & # 39; increases in interest rates by the Bank of Canada.

The Canadian economy grew by & # 39; & # 39 annual rate, two per cent in the third quarter compared with & # 39; 2.9 percent in the second quarter, matching the expectations of economists, according to Thomson Reuters Eikon.

However, economists said the data in the last reading of the economy showed worrying signs of & # 39; weakness, and added that a separate report showed that the economy ended the quarter on a weak note.

The Bank of Canada raised the main focus of interest rates in & # 39; October to 1.75 percent, its highest level in & # 39; about ten years. The investors' expectations that the central bank will keep its key rate when adding the announcement of its next rate next week, but the expectations were that & # 39; likely to increase in & # 39; in January.

Paul Ferley, assistant chief economist of & # 39; Royal Bank, indicate a reduction in business investment and greater than expected drop in residential investment as disappointing.

And Ferley said it appears that economic growth in the fourth & # 39; quarter will be even slower.

"I look like right now that Q4 growth can & # 39; is closer to one in two hundred," he said.

Ferley said he continues to expect an increase in the interest rate in the first quarter, but that will depend on how the economy fares and whether the reduction in the last quarter of 2018 proves to be transitory.

The third quarter ended with & # 39; weak note as the real gross domestic product declined by & # 39; 0.1 percent in & # 39; September. Statistics Canada noted that was the first move lower after seven & # 39; & # 39 consecutive months; growth.

The agency attributed the decrease & # 39; September to lower production in all industries producing items dropped 0.7 percent. The service industries rose 0.2%.

Stephen Brown, a senior economist at Canada & # 39; Capitun Economics, said fourth & # 39; quarter will be a bit of & # 39; boosted by the resumption of syncrude facility and the inclusion of & # 39; marijuana legalized in the statistics for the first time.

"But the biggest factor is that the economy is facing major violent by lower oil prices and weak new home sales," Brown wrote in & # 39; report.

"Both suggest that investment can & # 39; fall & # 39; more quarters & # 39; before. This will give the Bank of Canada pause for thought and meaning that an increase in the rate of & # 39, January is looking less likely than it did a month ago. "

In the third quarter, spending on non-residential investment in & # 39; & # 39 building and; engineering structures fell 1.3 percent, as investment in the oil sector and gas declined. Investment in machinery and equipment by businesses declined by 2.5 percent.

Meanwhile, growth in household spending slowed to 0.3 percent in the quarter, compared with & # 39; 0.6 per cent in the second quarter. The decrease was as spending on durable goods fell 0.7 percent, with spending on buying & # 39; vehicles decreasing 1.6 percent.
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Other residential investment also declined 1.5 percent as spending on construction & # 39; new home fell by & # 39; 4.7%, the biggest decline since the second quarter of 2009. Spending & # 39; renovation decreased by two, while the ownership transfer costs rose 7.1 percent.

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