OTTAWA – Divergence in North American economies shows little manifestation of narrowing.
While the U.S. economy performed much better than expected within the final quarter of 2015, Canada’s output likely slowed due to the ongoing drag from low oil prices and weak business investment.
On Friday, revised U.S. data showed that country still performed better than expected in the final quarter of 2015, managing revised annualized development of one percent, up from the previous estimate of 0.7 percent, and pointing for an improving pace for gdp in the first quarter of the year.
Revisions to U.S. GDP by the Commerce Department now put overall development in 2015 at 2.4 per cent.
That will be a hard act to follow along with for Canada, where the economy managed only 0.3 percent growth in November, coming following a flat reading in October and a 0.5 per cent decline in September.
December and fourth-quarter GDP data will be released , using the consensus of annualized quarterly growth being about 0.3 per cent, “so, hardly any growth,” said Douglas Porter, chief economist at BMO Capital Markets.
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As for Canada’s overall 2015 tally, forecasters aren’t anticipating more than one percent growth, and just slightly better output its this season – even with authorities stimulus spending and tax cuts for middle-class families.
Most estimates put Canadian GDP growth at 0.5 per cent in the first quarter of 2016.
“The story there’s that we believe we’re going to see another big stop by business capital spending. That’s where the weakness is coming from,” said BMO’s Porter.
Meanwhile, the U.S. economy has become forecast to grow by as much as 2.5 per cent within the first quarter of 2016.
“(But) we remain firm in our opinion the U.S. economy continues to grow, with reduced slack continuing to increase inflationary pressures and providing sufficient evidence to Federal Reserve officials to tighten monetary policy twice more later this year,” said Fotios Raptis, senior economist at TD Economics.
The recent financial market turmoil “poses a risk of a broader slowdown in global economic growth than a few of the backward-looking economic indicators are dictating,” Raptis said.
In December of last year, the Fed raised its key lending level one fourth point to between 0.25 and 0.5 percent, after sitting tight since 2008. The financial institution of Canada moved well before that – in January 2015 – but in the alternative direction, cutting its trendsetting rate of interest 0.75 percent in one per cent, where it absolutely was since September 2010.
The Bank of Canada’s next rate decision occurs March 9.
But most analysts don’t anticipate any change at that meeting, because of the federal government’s 2016-17 budget won’t be tabled until March 22.
However, the bank’s April 16 decision, which will accompany its forward-looking quarterly Monetary Policy Report, often see alterations in the outlook by policymakers on the economy and the possible impact of Ottawa’s spending plans.
Financial Post
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