Residential Market Commentary - Economy continues to grow

  • First National Financial LP

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.

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