Canadian Economy Surprises with Strong GDP Growth in 2Q

Canada’s economy unexpectedly accelerated at a 4.5 percent pace in the second quarter — tops among Group of Seven countries — led by the biggest binge in household spending since before the 2008-2009 global recession.

Annualized growth was the fastest in six years and topped the 3.7 percent average forecast from economists. The expansion surpassed the 3.7 percent first quarter growth rate, which was left unchanged Thursday by Statistics Canada. 

usdcad Canadian dollar graph, August 31, 2017

The surge in growth should help cement the chances the Bank of Canada will continue raising interest rates this year — possibly as soon as next week — as the nation’s economy nears full capacity in what is turning out to be the strongest growth spurt in more than a decade. The central bank forecast in July spare capacity would be eliminated by the end of this year, based on a second-quarter growth forecast of 3 percent.

“The hits just keep coming for the Canadian economy,” Doug Porter, chief economist at Bank of Montreal, said in a note to investors. “Even the naysayers will struggle mightily to find fault in this rock-solid report.”

Canada’s dollar reversed declines after the report, rising 0.5 percent to C$1.2551 versus its U.S. counterpart at 10 a.m. Toronto time. The loonie traded at 79.67 U.S. cents, and was the top gainer among Group of 10 currencies. Two-year government bond yields jumped four basis points to to 1.28 percent.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza