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Canada's recovery slows in second quarter
Date: 2010/9/1 Click: 1544
OTTAWA, Aug. 31 (Xinhua) -- The growth of the Canadian economy slowed to a crawl in the second quarter of 2010, surprising Canada 's central bank and private analysts.

Canada's gross domestic product expanded at an annualized pace of 2 percent from April through June, according to figures released on Tuesday by the federal agency Statistics Canada.

The disappointing results will likely stall any plans by the Bank of Canada to raise interest rates as a decision on rates is expected Sept. 8.

Bank of Canada governor Mark Carney has already said future rate increases will be "weighed heavily" against new economic data.

In the previous quarter, the economy expanded by an annualized rate of 5.8 percent. Statistics Canada's Tuesday statement revised first quarter growth downward from 6.1 percent.

Carney used the first quarter figures to raise interest rates twice in June. Last month, at a media briefing in Ottawa, Carney estimated GDP growth would slow to a 3 percent rate. In recent days, economists quoted in the Canadian media were more pessimistic, expecting a growth rate of around 2.5 percent.

"It's not like we were in a recession in the second quarter, but Canada's current account behaved as if we were, providing a glimpse into what lies ahead for our external balance in a world of slow growth," said Krishen Rangasamy, economist at Canadian Imperial Bank of Commerce World Market, said in a statement.

The disappointing GDP numbers are part of a string of recent financial data that show Canada's balance of trade is slipping, retail and wholesale sales are tapering off, and the Consumer Price Index is edging upwards.

Canada's balance of international payments was slightly weaker than economists expected, with the deficit in the second quarter increasing to 11 billion Canadian dollars from 8.5 billion in the first three months of 2010. Tuesday's data shows consumer spending on goods and service and house construction grew at a slower rate than in the first quarter.

"The weakness in global demand does not bode well for the improvement in net exports that was necessary to offset the slowdown in consumer spending expected in the near-term, as highly indebted Canadian households take a breather after driving most of the economic recovery," said Rangasamy.

Canada's trade position eroded in the second quarter, and reflects economic weakness in Europe, which has been thrown for a loop by its sovereign debt crisis, and, most important, in the United States, the country's largest trading partner.

The monthly trade reports from Statistics Canada suggest imports grew 20.1 percent on an annualized quarterly basis in the April-to-June period, contrasting with a modest 2.8 percent gain for exports.

The GDP report "reinforces the view that the Bank of Canada will stay on hold at its meeting in September," Sebastian Galy, a currency strategist in New York at BNP Paribas, wrote in a note to media and clients Tuesday.

He said the U.S. dollar, compared to its Canadian counterpart, is "moving higher as part of a wave of risk aversion and as odds of a September (Canadian interest rate) hike are priced out." Enditem (1 U.S. dollar = 1.06190029 Canadian dollars )
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