The Canadian economy grew 2.7 per cent at an annual rate in the third quarter, the fastest pace of growth in almost two years. The economy was given a boost by an uptick in business investment which helped to offset a slight deceleration in household spending and a dip in exports. Moreover, while third quarter growth was strong, a significant portion of that growth came from accumulation of inventories and therefore we do not expect a repeat performance in the fourth quarter.
Although today’s GDP report was welcome news for the Canadian economy, It is unlikely to influence the Bank of Canada’s interest rate decision next week. It will take several quarters of similar growth and a concomitant rise in inflation before the Bank of Canada moves on interest rates, an outcome we do not see until 2015.