With inflation deemed to be under control the
Bank of Canada is focusing on other factors as it determines its interest rate
policy.
A major one of those is economic growth, or
Gross Domestic Product. GDP is the value
of all goods and services produced by the economy.
The latest numbers from Statistics Canada show
GDP increased by 1.0% in the third quarter (July, August, September). That is lower than the 1.5% growth forecast
by the Bank of Canada but it is unlikely the Bank will alter its current path of
interest rate reductions. In fact, many
market watchers, including some of the big banks, believe the BoC will make
another, large, 0.50% cut to its benchmark Policy Rate when it announces its
final setting for the year on December 11.
Higher consumer and government spending are
credited for most of the GDP increase.
Residential investment showed more life in the third quarter, climbing
by 3.0% – the first increase in four quarters.
GDP growth was also revised slightly upward
for the second quarter, coming in at 2.2%, up from 2.1%.
Unfortunately, GDP per capita (which is GDP
divided by the population) continues to shrink, falling for the 6th
straight quarter. That could help
explain why many Canadians do not feel that the economy is getting better.
There is one more major report to come before
the next BoC rate announcement. The
latest employment numbers are due on Friday.