In the wake of the latest quarterly GDP results, UBS Securities Canada Inc. has cut its economic forecast for Canada once again.

Statistics Canada reported Tuesday that the July-to-September period saw the economy slow to a crawl, eking out a 1% gain in gross domestic product.

In a research note published Friday, UBS trimmed its Canadian GDP forecast for 2011 to 2.3%, down from 2.8%. A couple of months ago it cut its outlook for 2011 from 3.2%.

“The paltry 1.0% advance in Canada’s [third quarter] GDP marks the weakest gain in a year, and the largest margin of underperformance relative to the U.S. since the recovery began,” it says.

“To some extent, the economy is a victim of its own success, as final domestic demand posted another robust gain—this time 3.8%—however, that contributed to a 6.4% rise in imports while exports slid 5.0% due to soft U.S. demand and a [Canadian dollar] that has appreciated to levels 8-10¢ beyond that indicated by commodity prices.”

The best news out of the latest quarterly GDP statistics was the third consecutive surge in business capital expenditure, UBS notes, adding that this indicates both that strong profits are being deployed, and “a very orderly transition from government capex, which soared during the recession and has now been flat for three straight quarters”.

On the negative side, housing slumped, as did the consumer savings rate, indicating that “spending will be limited by income growth”.

UBS also said that it expects 2012 growth of 2.7%, and that the Bank of Canada will gradually raise short term rates to 2% by the end of 2011.

IE