The Canadian economy was stronger than expected as 2009 drew to a close and the coming week will bring the opportunity to see if the pace was maintained in the early part of 2010. Gross Domestic Product grew 5% on an annualized basis in the final quarter of 2009, almost a full percentage point more than economists were expecting.
Later today Statistics Canada will publish GDP figures for January and economists are predicting a 0.5% rate of growth. While this number is strong it is still less than the 0.6% rate of growth recorded in December.
“The new year got off to a flying start, thanks to a significant ramp-up in manufacturing and wholesaling activity . . . with some additional contribution from retailing,” CIBC World Markets economist Krishen Rangasamy said in a research note.
Analysts expect that these figures will not prompt the Canadian Central Bank to increase interest rates before July given than output remains well short of potential in the Canadian economy.
Millan Mulraine, an economic strategist with TD Securities said “In the coming months, we expect this positive momentum in the Canadian economy to remain largely intact, as the significant monetary and fiscal policy stimulus administered to the Canadian economy continues to bolster activity.”
Yesterday saw the Canadian Dollar rise for the second day against its US counterpart as gains in global equities and crude oil spurred demand for commodity currencies. It gained 0.20% against the US Dollar during trading to close at CAD 1.0192. The previous day it advanced 0.51% against the US Dollar to CAD 1.0214.
The currency has gained 3.6% against the US Dollar so far this year, the second best performer after the Mexican Peso among the 16 most traded currencies in the forex market. It will be the fourth straight quarterly rise for the currency, which tends to rise and fall with commodity prices.
“The Canadian Dollar remains a market favorite and after a brief correction last week appears to be back on track for a move towards parity”, said Steve Butler, director of foreign exchange trading in Toronto at Bank of Nova Scotia, Canada’s third largest lender.
Canada’s currency, dubbed the Loonie for the aquatic bird on the CAD $1 coin, reached CAD 1.0062 on March 19th, the strongest level since mid 2008 on speculation that the Bank of Canada would increase interest rates before the US Federal Reserve after a report showed that consumer prices gained more than forecast in February. It traded within one cent of parity with the US Dollar before slipping back as crude oil prices fell.
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