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Canadian economic growth accelerates slightly in Q4 2017

The Canadian economic growth accelerated a bit in the fourth quarter of 2017. The real GDP grew 1.7 percent on a sequential basis, as compared with the revised pace of 1.5 percent in the third quarter. Healthy gains in export prices led to considerable gain in nominal output, which rose strongly by 6.5 percent. In 2017 as a whole, real GDP grew 3 percent, while nominal growth came in at 5.3 percent – the strongest rate since 2011.

Investment led the overall growth higher, rising at an aggregate level of 9.6 percent. Investment in residential investment rose sharply by 13.4 percent. New construction rose 12.7 percent, while ownership transfer costs rose sharply by 42.8 percent likely reflecting a rebound from earlier quarters and the full-forward of activity ahead of January’s changes to mortgage underwriting rules. Non-residential investment also came in solid. Government investment rose 10.3 percent.

Consumers in Canada eased their jets slightly as household consumption decelerated a bit, to 2.1 percent. The rate of goods spending dropped to 1.6 percent, while spending on services decelerated to 2.5 percent from 5.7 percent previously.

Trade contributed negatively by 1.1 percentage points as export growth was unsuccessful in keeping up with imports. Inventories also contributed negatively to growth as companies added slightly less to their stocks.

Income gains were also solid in the quarter, as aggregate employment compensation rose 6.1 percent. This was down largely to a 6 percent rise in wages and salaries. Household disposable income rose strongly by 5.2 percent, leading to a slight rise in the household savings rate to 4.2 percent, from an upwardly revised rate of 4 percent previously.

Momentum heading into 2018 is modest, noted TD Economics. Monthly GDP rose 0.1 percent sequentially in December as 13 out of 20 major industries recorded growth. The goods-producing side of the economy dropped a bit on subdued manufacturing and construction. Services held up, bringing its run of uninterrupted growth to 21 months as weakness in wholesale and retail trade were countered by rises in almost all other categories.

At 20:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was slightly bearish at -69.7282, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -25.7589. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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