Thursday, September 20, 2007

RBC reports that our Economy forges ahead in the second quarter

Strong Signals - Economy forges ahead in the second quarter

Second-quarter GDP grew by a stronger-than-expected annualized 3.4%, following an upwardly revised 3.9% gain in the first. The monthly 0.2% gain in June was also an upside surprise, with markets expecting no gains. Strength late in the second quarter suggests strong momentum going into the third.

Employment increased by 23,300 in August, beating the 11,300 increase in July.

The unemployment rate held at 6%, the lowest level since 1974 and wage growth continued to be firm. The average hourly wage rate for permanent workers rose 0.9% and was 3.8% higher than in August 2006, the fifth month of solid monthly gains and the fastest pace of increase since August 2006.

Retail sales declined 0.9% and 0.3% excluding autos. However, real retail sales advanced at an annualized 10.8% in the second quarter, the fastest quarterly pace since the fourth quarter of 2001.

Housing starts were stronger than expected in August, coming in at a 226,500 annualized rate, firmer than market forecasts for 220,000 units and faster than July's 215,600 unit rate, indicating that Canada's housing market continues to perform well, backed by strong employment gains and income growth.

Canada's merchandise trade surplus shrank to $3.7 billion in July and June's surplus was revised down by $1 billion to C$4.3 billion. Exports increased by 1.4%, while imports rose by a sturdy 3.5%, pointing to the sector acting as a weight on the pace of economic activity in the third quarter.

The year-over-year all-items inflation rate held steady at 2.2% in July, while the Bank of Canada's core inflation rate slipped back to 2.3% from 2.5% in June. However, despite the dip in the core inflation rate, it has held above the Bank's 2% target for 11 months.

Courtesy of Dawn Aspinall RBC Economics Research

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A. Mark Argentino
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