Canada: Detail suggest further slowing in Q4 – RBC CM

Paul Ferley, Assistant Chief Economist at RBC Capital Markets, points out that GDP growth slow down during the third quarter and details suggest further slowing in the fourth quarter.  

Key Quotes:  

“Canadian Q3 GDP growth moderated as expected to 2.0% from the 2.9% gain recorded in Q2 though with the details suggesting a further slowing in Q4.”

“The details in today’s report are indicative of growth likely slowing further in Q4 closer to a 1% rate. This was in part conveyed by a disappointingly weak composition of Q3 GDP output with business investment unexpectedly declining by a sizeable 7.1%, reportedly weighed down by softer oil & gas investment.”

“The projected further weakening in Q4 will be abetted by the transitory downward impact from the recent postal strike.”

“The slump in oil prices could weigh on activity as well though with the duration a function of how long the slump persists. These developments imply a clear downside risk to the Bank of Canada’s current forecast of Q4 growth bouncing back to 2.3%. Our expectation is that the central bank is still likely to move the current overnight rate of 1.75% to within its estimate of ‘neutral’ within a range of 2.50% to 3.50%. However, such will be dependent on indications that any slowing in Q4 proves transitory.”