Canadian Confidence Hits 10-Year High As Economy Blows Past Expectations

Canadian Confidence Hits 10-Year High As Economy Blows Past Expectations

Coming after a strong Q1 which saw the US reaching two-year highs, GDP has surpassed previous Department estimates for Q2 of 2.6 percent.

The Commerce Department said on Wednesday that the economy had expanded at an annual rate of 3 percent in the second quarter of the year, better than initially estimated, and a substantial acceleration over the first quarter's lackluster 1.2-percent pace.

"The general situation of the economic growth remain unchanged, with an increase in consumer spending and investments in non-residential real estate more important than in the previous quarter", said the ministry, stressing that " these increases were partially offset by a slight decline in public spending ".

The revisions bring the pace of first-half growth to 2.1 percent, about equal to the average rate since the last recession ended in 2009.

Most experts believe the central bank will raise rates just once more this year, but a faster economy or an increase in wages or inflation could prompt policymakers to move more quickly to tighten monetary policy and shrink the Fed's balance sheet in 2018.

The expectation is that the overall economy, as measured by the gross domestic product, grew at an annual rate of 2.7 percent in the second quarter, according to the consensus of economists surveyed by data firm FactSet.

"Still, this will be, to the extent possible, a 'dovish hike, ' as the Bank will hint at a likely pause after September, lest markets push the Canadian dollar with too much enthusiasm and threaten downside pressure on exports and CPI".

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Household final consumption and exports of goods were the main contributors to the stronger growth, Canada's national statistics agency added.

Trump promised 4% growth on the campaign trail, but his administration has since set a goal of 3%. Fixed nonresidential investment rose at a 6.9% pace last quarter, up from an initial estimate of 5.2%, including stronger spending on software.

"It is the best quarter since the first quarter of 2015", said Mickey Levy, at Berenberg.

"Even as we see daylight in today's economy, we find ourselves in the shadow of daunting longer-term challenges to economic growth and shared prosperity", said John Williams, president of the Federal Reserve Bank of San Francisco, in an August 2 speech.

"I happen to be one that thinks we can go much higher than 3 percent".

Growth estimates for Q3 are being projected as high as 3.4 percent and seems to be starting off on the right foot.

With good news about Canada's economy rolling in on a regular basis in recent months, Canadians are feeling pretty positively about the future. "This could subtract 0.2 % to third quarter GDP growth, although this may be higher when the estimates on the damages will be available", stresses Chris Low, chief economist FTN Financial.

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