(August 31 – 15:45 ET) – The Canadian economy is expanding at a solid
pace of 3.3 per cent in the second quarter, according to the latest
Commentary report issued by the Bank of Montreal
Economics Department.
The solid overall gain is attributable in large part to expenditures
such as residential investment, says BMO. It rose 15.4 per cent, and
consumer spending increased 3.0 per cent. The strongest component in
the quarter was machinery and equipment with a 40.5 per cent increase
in investment. Since most machinery and equipment is imported, its
immediate impact on growth is negligible.
A jump in inventories also provided a significant contribution to
overall GDP growth, says BMO A rise in commodity prices contributed
to nominal exports showing stronger growth in the quarter. As a result
the current account deficit remained low, although it did deteriorate
slightly to $5.3 billion from $4.0 billion in the first quarter, at an
annual rate. These figures remain well below last year’s level of $17.8
billion.
A pickup in employment growth in July bodes well for further gains
in consumer spending and residential investment in the third quarter,
BMO predicts in the report. Export growth is expected to return to a
higher rate of increase, and inventories will likely rise at a slower
pace and thus weigh on GDP growth.
-IE Staff
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