Canadas economy stuck in low gear

OTTAWA — The pace of Canada’s economic growth held steady in the second quarter, supported by business investment but kept in check by weaker exports and a softer housing sector.Gross domestic product rose 0.5% between April and June, matching increases in the previous two quarters, Statistics Canada said Friday.On an annualized basis, GDP was up 1.8% in the second quarter, the same pace as the first previous quarter and slightly stronger than the 1.7% growth in the United States.That increase nearly matched the forecast by the Bank of Canada, and beat economists’ calls for a 1.6% annualized increase in the second quarter.Business investment in plants and equipment grew 2.3%, the strongest increase in a year, the federal agency said, “continuing a string of consecutive increases that began in 2010.”Corporate spending in machinery and equipment was also higher, rising 1.8%, compared with an increase of 1% in the first quarter. Much of that investment was in transportation equipment and industrial machinery, the agency said.Consumer spending rose 0.3%, up slightly from 0.2% in the January-to-March period. Still, that was down from growth of 0.7% in the fourth quarter.By industry, the advance in GDP was led by goods production, up 0.9%, and services, up 0.3%. “Mining and oil and gas extraction, and construction were the main contributors to overall growth,” Statistics Canada said. “Gains were also recorded in manufacturing, agriculture, wholesales trade, the finance and insurance sector and professional services.”The retail and utilities sectors declined in the second quarter.Meanwhile, housing investment slowed to 0.2% after a 2.5% jump in the first quarter, reflecting recent data showing the residential market is beginning to cool.Export growth was also weaker, rising just 0.2% in the second quarter, compared to a gain of 1% in the previous quarter and marking the slowest pace since the third quarter of 2011.Imports, on the other hand, rose 1.6% after rising 1.3% between January and March.For June, GDP was up 0.2% from the previous month, beating economists’ expectation of a 0.1% gain.Not surprisingly, government spending declined 0.1% in the second quarter amid public-sector cost-cutting measures.In a speech last week to the Canadian Auto Workers union, Bank of Canada governor Mark Carney said that despite a slowing global economy, Canada’s output is “roughly in line with growth of the economy’s production potential” and is expected to pick up in 2013.“Consumption and business investment are expected to be the primary drivers of this moderate growth, reflecting very stimulative domestic financial conditions,” he said.“While Canadian exports are projected to improve, they are likely to remain below their pre-recession peak until the beginning of 2014.”The central bank has held its key interest rate at a near-record low of 1% since September 2010 in an effort to stimulate the economy coming out of the recession.

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