Yahoo Finance Canada notches weak fourth-quarter growth
Canada's economy expanded at an annualized rate of 0.6 per cent in the fourth quarter, exactly matching market expectations and producing another reason for the Bank of Canada to remain on the sidelines for some time.
The release follows similarly disappointing revised third quarter growth of 0.7 per cent, and marks the weakest six-month stretch of growth since the third quarter of 2009, said Charles St-Arnaud, economist and currency strategist at Nomura Securities.
Friday's data also marked the weakest quarterly performance since the second quarter of 2011, when exports were particularly hit hard in the aftermath of the Japanese earthquake and tsunami.
"Weak growth like that means that the economy has been growing below potential. That means spare capacity in the economy is growing and that inflationary pressure is also very weak. We see that with inflation that is below or very close to 1 per cent," he said.
"That means the Bank of Canada is in no hurry for hiking rates."
Canada's central bank has been hinting for months that it intends to hike interest rates, but in January signaled a move in that direction might be "less imminent."
Growth during the fourth quarter period was largely driven by consumer spending and business investment, Statistics Canada said on Friday. Imports were down, while exports increased slightly. The main drag on economic expansion was a sharp drop in inventories.
December growth shrank 0.2 per cent, a tad below expectations due to a drop in manufacturing and retail trade in a "nasty combination," said Doug Porter, chief economist at BMO Capital Markets.
Despite the sour headlines, however, there actually were some "mildly encouraging subplots in the data," as most components of spending managed to fare better than expected in the fourth quarter, he added.
"The lacklustre growth through the second half of 2012 comes as no big surprise, and the 0.2 per cent drop in December GDP means the economy has some serious work cut out for it to get back on track," Porter said in a note.
