Bloomberg News

Canada Economy Shrank for First Time in 6 Months on Mines

October 31, 2012

Canada’s gross domestic product shrank for the first time in six months in August on mining maintenance shutdowns and lower factory production, paring the annual growth rate to the slowest in more than two years.

Output fell 0.1 percent to an annualized C$1.29 trillion ($1.29 trillion), Statistics Canada said today, compared with the 0.2 percent increase that was the median forecast in a Bloomberg survey of 23 economists. Output grew 1.2 percent in August from a year earlier, the slowest pace since January 2010.

The world’s 11th largest economy is being restrained by an inconsistent global recovery with risks posed by Europe’s debt crisis and the prospect of automatic tax increases and spending cuts in the U.S. next year. Finance Minister Jim Flaherty cut growth and revenue forecasts Oct. 29, citing lower commodity prices, while Bank of Canada Governor Mark Carney last week said the need to raise interest rates is “less imminent.”

Manufacturing declined 0.6 percent in August following July’s 0.9 percent increase, with durable goods such as metals and furniture dropping by 1.3 percent, Statistics Canada said. Mining and oil and gas production fell 0.7 percent, with mining output falling 2.8 percent due to scheduled maintenance at sites that produce metal ore.

The August economic contraction was limited by a 1 percent increase in wholesale trade and a 0.3 percent gain in transportation and warehousing.

The economy probably expanded at a 1 percent annualized pace between July and September, and should grow at a 2.5 percent fourth-quarter pace, the Bank of Canada said Oct. 24.

Canadian National Railway Co., the country’s biggest railroad, said Oct. 22 it may not reach the upper end of a forecast range for full-year profit. “Given the weak economic context, however, we certainly have our work cut out,” Chief Financial Officer Luc Jobin said on a conference call.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net


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