Canadian GDP Improved in April

June 30, 2008

Real GDP in Canada grew 0.4%, led by increases of 2.1% in wholesale trade, 1.9% in factory output, and 0.6% in retail sales.  April’s improvement failed to offset fully negative growth in both February and March.  GDP fell 0.4% at an annual rate during the six months to April and advanced only 1.2% from April 2007.  In April, construction slipped 0.7%, and energy production declined 1.1%, with oil and gas extraction dropping by 1.7%.  A 7.0% jump in motor vehicle production followed extreme weakness in recent months.  Industrial production went up 0.7% but still posted a 4.5% drop from April 2007.  The Bank of Canada surprised forecasters at its last meeting on June 10th.  It did not cut rates further after reducing them by 150 bps between December and April, and officials asserted then that their credit stance is “appropriately accommodative” to deliver 2% inflation in the medium term.  The 0.4% GDP growth in April is slightly better than consensus forecasts but not enough so to change the thinking of the central bankers nor how market participants perceive the policy stances.



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