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Sunday 23

September, 201810:46 AM



Exports boost Canadian economy to best growth in a year

Exports boost Canadian economy to best growth in a year

Canada?s GDP has surged in 2018 during the second quarter as the North American nation posted the best economic results for a year.

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By Oliver King 31.08.2018

Canada’s GDP has surged in 2018 during the second quarter as the North American nation posted the best economic results for a year.

A double boost of increased exports and a rise in consumer spending has precipitated the increase, which comes at a helpful time for Prime Minister Justin Trudeau as his country navigates the fallout from US President Donald Trump’s aim to dismantle the North American Free Trade Agreement (NAFTA).

With the news announced before the Bank of Canada meets next week, the positive economic outlook will hopefully help withstand any future uncertainty caused by an inability to reach trade agreements with Canada’s direct neighbor.

President Trump is looking to pull NAFTA apart and seek bilateral ties separately with Mexico and Canada rather than the current trilateral agreement, Canada has looked elsewhere for exporting its goods, which appears to have paid off.

Canada’s GDP grew at a rate of 2.9% between April and June of this year, which is its strongest performance in 12 months. The first quarter of 2018 was less positive, posting only 1.4% growth.

More than doubling the GDP will help ensure investor confidence at a time when Canada is facing rocky trade waters with the US. Although the rise missed economist predictions of 3%, it still rose slightly more than the central bank’s estimate of 2.8%.

Strong performances in other areas saw an uptake in general outlays on services in Canada, which was up 0.8%. This fell in line with average spending by each household, which saw a 0.6% increase and heavily outperformed the first quarter of 2018, which only managed a 0.3% increase.

The main reasons for such a strong showing in exports came down Canada exporting more energy as it ramped up production. With levels of consumer goods and pharmaceuticals also on the rise, this helped the GDP hit its biggest increase in four years.

This should give license to the Bank of Canada to keep central interest rates the same, placating investors who have already seen them increase four times since July 2017. The most recent rise of 1.5% came in the middle of last month.

Senior Canadian Economist at Capital Economics Stephen Brown said that these positive results will give backing to those in charge of policy to carry on with what they are doing, but they could see effects due to the fallout from NAFTA, with President Trump rumored to be considering levying tariffs on the Canadian car industry. 

Despite this, Brown thought that Canada was likely to hold firm and that its central bank would carry on with its monetary policy of slowly increasing interest rates. This will allow the bank to go ahead with plans to bring in slight rate rises around October.

The US and its southern neighbor Mexico confirmed this week that they have reached an agreement on some key sections of a trade deal as they look to completely revamp some elements of the 24-year-old NAFTA deal. Talks between the US and Canada remain ongoing, but a breakthrough is yet to occur.

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