Sluggish Global Economy Slows Down Canadian Economic Growth
Statistics Canada reports that Canada’s economy slowed to 0.06 percent in the third quarter. In contrast, the second quarter of 2102 showed a GDP of 1.7 percent gain. A steep drop in business investment, exports, and declining home construction, among other factors, are to blame for the decline. Business investment, exports, and residential constructions declined by 2.2, 2.0, 4.4 percent in the third quarter.
However, consumer spending and a rise in inventories showed some unexpected growth that were able to offset even further slow down. Consumer spending and inventories rose by 3.8 and 1.6 percent in the third quarter.
Paris-based The Organization for Economic Cooperation and Development (OECD) states that weak global economy is keeping Canada’s economic growth in the slow lane and it is likely to remain slow until mid-2014. OECD expects Canada’s economy to grow 1.8 percent in 2013 and 2.4 percent in 2014.
Weak foreign export markets due to government austerity programs and high household debts and government cutback in spending at home are to blame for Canada’s economic slowdown. However, Canada’s GDP growth rate is still stronger than OECD average rate consisting of its 34 member countries.
OECD also projects that the U.S. economy will recover faster in the next two years than Canada due to the fact that the U.S. recovery level starts from further behind than Canada. The expected recovery rate in the U.S. will be at 2.00 and 2.8 percent in 2103 and 2014. Unemployment rate is expected to fall below 7 percent in Canada and stay close to 8 percent in the U.S. in 2014.
OECD thinks Canada should start increasing its interest rate from latter 2013. However, as these numbers point out, it is unlikely for the Bank of Canada to start raising interest rates until early or mid-2014. The overall Canadian economic outlook is far better than most other industrialized countries, especially Europe. Europe is going through a recession and is likely to remain in recession until late 2103 to early 2014.
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