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Canadian GDP rises in Q4 lifting loonie
Canada’s growth rate exceeded all forecasts for the final quarter of 2014, which will probably keep the Bank of Canada from cutting rates at its policy meeting today.
Gross domestic product grew at a 0.6 per cent pace in the final three months of 2014. This figure was slightly slower than the pace seen in the previous quarter but better than what analysts expected. It followed a 0.8 percent gain in the third quarter.
On a monthly basis, the Canadian economy expanded by 0.3 percent in December on gains in manufacturing, following a November contraction of 0.2 percent. Economists predicted a December expansion of 0.2 percent.
With these improved figures, the markets expect the Bank of Canada to hold rates today. In mid-February the market was pricing a 75 percent chance of a cut but that has fallen to 25 percent after a series of better data points including employment, retail sales and CPI.
Canada became the first Group of Seven nation to cut interest rates in response to plummeting oil prices, saying the shock will weigh on everything from inflation to business spending. The current rate is at 0.75 percent.
Household final consumption expenditure rose 0.5%, contributing to economic growth in the fourth quarter, while business gross fixed capital formation edged down 0.1% after a strong third quarter. Final domestic demand rose 0.4%, following a 0.7% increase.
The Canadian dollar strengthened right after the data on Tuesday. This pushed down USD/CAD to 1.2432 from a pre-data level of 1.2522. By Wednesday, the loonie gave back some of those gains.
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