Canada's economy grows as US shows signs of weakness

Canada's economy grows as US shows signs of weakness | Smart Association - CHHMA


For the seventh consecutive month, Canada's economy continued to expand on the back of the thriving crude oil and financial services industries.

Citing Statistics Canada, Bloomberg reported a 0.1% increase in Canada's GDP due to the record-high growth in Alberta's oil production and the boost given by higher stock and bond trading to the financial services sector.

The current pace of economic growth is keeping the momentum for higher interest rates. For the Bank of Canada, the economy is "at or near full capacity", signalling further hikes to come. It recently raised interest rates for the fifth time since July last year.

For some industry experts, however, the August GDP growth did lack the growth extent in the past as more than half of major industries posted declines.

In fact, the slowdown in the real estate sector has led to the 0.4% decline in construction. Meanwhile, manufacturing posted the biggest drag to the economy at 0.6%, no thanks to the shutdowns at auto assembly plants. Retail and wholesale figures also posted underwhelming growth in August.

While Canada enjoys the still robust economic growth, the U.S. is starting to see weakness as it reported a 3.5% GDP expansion rate for the third quarter of the year.

U.S. Q3 growth was relatively weaker than the previous quarter's 4.2%, which was one of the best six-month periods over the past 10 years.

For many industry watchers, this could be a signal that challenges loom ahead for the economy. In a report in The Toronto Star, economists said U.S. growth has already peaked.

A poll by The Wall Street Journal also revealed that a majority of economists expect that the U.S. growth rate will ease to 2.5% by the first quarter and 2.3% by the third quarter of next year.

What gave the U.S. a boost this year were consumers and government spending. These two, however, are expected to moderate in the months ahead.

For many economists, business investment remains to be a big wild card for U.S. economic growth. As the government slashes business tax, investment in software, plants, and equipment will continue to flow.

The White House is expecting a sustained growth of 3%, banking on the persistent business-investment boom. For the first quarter of 2018, investment rose at an 11.5% rate across categories. However, it has faded since then, posting a 0.8% growth in the third quarter.

For the sustained economic growth to be a reality, business investment should rebound and many reckon that a lower corporate tax rate will spur growth in the space.

"The economy is still strong other than some of this noise introduced by the trade tariffs and whatnot. We don’t really have a read whether this is just a temporary glitch or a start of a trend," Echo Global Logistics chief executive Douglas Waggoner said.