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Canada’s economy lags forecast as energy slumps

07.01.2014  | 

Canada's mining, quarrying and oil and gas production declined 0.6% in April, the first drop in four months, in part because of oil refinery maintenance shutdowns

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By GREG QUINN
Bloomberg

Canada’s gross domestic product grew less than economists forecast in April as production of goods such as energy fell while service industries including wholesaling expanded.

Output rose 0.1% to an annualized C$1.62 trillion ($1.51 trillion), the same pace as in March, Statistics Canada said Tuesday in Ottawa. The median forecast in a Bloomberg economist survey was for the world’s 11th largest economy to expand 0.2%.

The first report on growth for the second quarter signals a modest rebound from the January to March period, when the expansion slowed to a 1.2% annualized pace as a harsh winter disrupted production. Economists predict Bank of Canada Governor Stephen Poloz will keep his key lending rate at 1% at the July 16 decision to aid an economy he said won’t reach full capacity until 2016.

“The economy has largely run out of excuses” for slow growth, said Doug Porter, chief economist at BMO Capital Markets in Toronto. The figure today “re-enforces the broader picture that the economy isn’t picking up smartly in the spring as some had hoped.”

The report showed a split between a 0.3% gain for service industries and a similar decline for goods production, with every major component of that category except for manufacturing shrinking in April.

Canada’s dollar weakened for the first time in four days, depreciating 0.2% to C$1.0686 per US dollar. Government bond yields fell, including the security due in five years, to 1.54% from 1.56%.

Wholesale Leads

Wholesale trade led the services increase with a 1.3% gain on higher sales of machinery, equipment and supplies, Statistics Canada said. Retailing gained 0.8%, led by automobiles, food and clothing. The output of real estate agents increased 3%, the third straight gain.

Mining, quarrying and oil and gas production declined 0.6% in April, the first drop in four months, in part because of oil refinery maintenance shutdowns. Construction fell by 0.6% and the output of utilities companies fell 1% on reduced electricity demand.

The economy grew 2.1% in April from a year earlier, the same pace as in March.

The Bank of Canada predicted in April that gross domestic product would grow at a 2.5% pace in the second quarter. Economists surveyed by Bloomberg through last week forecast a 2.2% increase.

“There is very little growth in the industry,” Tim Hortons CEO Marc Caira said in a June 26 interview in Ottawa. “In this environment it’s very difficult to raise prices.”

Canada’s largest coffee chain is seeking to boost revenue by offering more combination meals that increase how much customers spend at each visit, he said.



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