By Leah Schnurr
OTTAWA, Dec 1 (Reuters) - Canada pulled out of recession in
the third quarter as an acceleration in exports revived growth,
supporting expectations the Bank of Canada will be content to
keep interest rates where they are for some time.
Gross domestic product increased at an annualized 2.3
percent rate last quarter, data from Statistics Canada showed on
Tuesday. That was a tad shy of expectations for a 2.4 percent
pace and slightly below the Bank of Canada's forecast of 2.5
percent.
The quarter also ended on a weak note as economic activity
in September fell by a worse-than-expected 0.5 percent, driven
by the decline in the oil and gas industry after a temporary
production disruption.
But economists expect growth should pick back up in October,
which will keep the Bank of Canada on hold when it makes its
interest rate decision on Wednesday. The central bank cut rates
twice this year to offset the impact of cheaper oil prices on
the economy.
"Because the primary driver of the weakness in the September
figures was a one-off factor, I don't see the Bank of Canada
responding with any policy action," said CIBC Capital Markets
economist Nick Exarhos.
The Canadian dollar weakened against the greenback
immediately following the report. CAD/
Exports, a sector that is key to the central bank's outlook,
climbed by an annualized 9.4 percent in the quarter, helped by
an increase in shipments of goods including motor vehicles and
consumer items. Exports of crude oil and crude bitumen also
rose.
An increase in investment in residential construction and
consumer consumption also contributed to economic growth,
suggesting cheaper borrowing costs were having an effect.
But business investment fell for the third quarter in a row,
suggesting companies had not yet shaken off the shock of lower
oil prices that put Canada in recession.
In the first half of the year, Canada's economy had two
consecutive quarters of contraction, which is typically
considered the basic definition of a recession. It was the
country's first recession since the 2008-09 global financial
crisis.
Concerns about Canada's weak performance played a part in
October's election of the new Liberal government, which pledged
to boost growth through infrastructure spending.
Separate data on Tuesday showed the pace of growth in the
manufacturing sector contracted in November for the fourth month
in a row.
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Graphic - Canada monthly GDP, exports to the U.S.: http://link.reuters.com/jev87s
Graphic - Canada economic dashboard http://graphics.thomsonreuters.com/15/sc-canada/index.html
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