Canadian economy smashes expectations with 4.5 per cent growth

Lucy Bush
September 1, 2017

The Canadian GDP grew 4.5 percent quarter-on-quarter, as compared with consensus expectations of a growth of 3.7 percent.

"The general situation of the economic growth remain unchanged, with an increase in consumer spending and investments in non-residential real estate more important than in the previous quarter", said the ministry, stressing that " these increases were partially offset by a slight decline in public spending ".

Business spending got a boost from software, helping intellectual-property investment rise at a 4.9 percent pace, up from an initially reported 1.4 percent.

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

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Even with the expected upward revision, GDP growth is still falling short of the optimistic goals President Donald Trump hopes to achieve through tax cuts, regulatory relief and tougher enforcement of trade agreements.

While it seems unlikely that another quarter of 4 percent plus growth is in store any time soon, the strong monthly data for June implies that Canada still had strong momentum heading into the summer months, with every early tracking implying that the third quarter growth could be around 2.5 percent - a strong rate by any measure and one likely to push Canada into excess demand territory, said TD Economics. It's also up almost 2 percent from the beginning of this year.

During last year's presidential campaign, Trump repeatedly attacked the Obama administration's economic record. Thus, if consumer and business spending hold up for the balance of the year and firms build their inventories at a relatively normal pace, real GDP growth in the second half of the year could accelerate to 3 percent or better.

The department said increased consumer spending was the main reason for the growth. And I think we can go far beyond 3 %.

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Thursday's GDP data shows exports expanded 2.3% from April to June, up from 0.4% in the first three months of the year. That was an improvement from the lackluster 1.2 percent rate in the first quarter.

The data agency said cumulative growth in the first two quarters of 2017 marked the strongest start of a calendar year since 2002, and the second-quarter data marks the best 12-month performance - 3.7% growth - for the Canadian economy since 2006, or near the height of the bull run in commodity prices. "It puts us on a stronger path going into the third quarter, although Hurricane Harvey introduces some uncertainty".

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. The GDP report sent it all the way to 1.2575.

With good news about Canada's economy rolling in on a regular basis in recent months, Canadians are feeling pretty positively about the future.

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