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News: Canada growth shatters expectations

Thu, 01 Nov 07

Canada's gross domestic continued to see steady growth in August, rising 0.2% on strong spending by the Canadian consumer. Economists had been predicting a rise of about 0.1% for the month, reports the Canada Post...

Increases in retail trade and oil extraction propelled the growth, Statistics Canada said on Wednesday, while a decline in utilities dampened it. Retail trade jumped 1.3%, following two months of decline, on a surge in sales at new car dealers.

"Domestic demand remains solid and the economy is operating in a state of excess demand, which is likely to keep the Bank of Canada sidelined as policymakers assess the impact of these downside risks on the medium-term outlook," wrote RBC Financial Group senior economist Dawn Desjardins in a commentary.

South of the border, the U.S. economy blew through expectations to post 3.9% growth in the third quarter, topping economists' expectations of a 3.1% rise.

Consumer spending rebounded from a modest second quarter to post 3% annualized growth, while exports punched in with a strong 16.2% rise. The two indicators were able to offset continued misery in the housing market, as residential fixed investment tumbled just over 20%.

While the strong growth is an encouraging sign for those worried about the health of the U.S. economy, the effect of recent financial market turmoil will likely weigh on growth in the fourth quarter, said Ms. Desjardins.

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