Loonie Slides As Canadian GDP Slows In Fourth Quarter

By Tzu-Wen Chen,

THETAKEAWAY : [ Canadian GDP growth slowsto 1.8 percent in fourth quarter, December growth stronger thanforecast] > [Export, housing slowed; Monthly growth led bymanufacturing and retail trade] > [Canadiandollar weakens]

The Canadian economy slowed to an annualized rate of 1.8 percent in the fourth quarter as exports, housing and inventory build-up slowed while consumer spending grew. The reading falls in line with the median forecast according to a Bloomberg News survey, but missed the Canadian central bank’s forecast of 2 percent growth. Third quarter expansion was revised upwards from 3.5 percent to 4.2 percent.

Monthly GDP in December was stronger than expected, rising by 0.4 percent to reverse the unexpected contraction by 0.1 percent in November. On a year-over-year basis, GDP grew by 1.8 percent. The consensus call was for a 0.3 percent rise in December, and a 12-month increase of 1.9 percent, according to economists surveyed by Bloomberg News.

According to a report by Statistics Canada, growth in December was led by the manufacturing, retail trade, and oil and gas extraction industries. Manufacturing increased by 1.5 percent on higher production of transportation equipment and equipment, while retail trade rose by 1.4 percent. Oil and gas extraction rose by 0.9 percent, primarily due to increased natural gas production as oil extraction was limited by maintenance activities during the quarter. In contrast, mining fell by 3.8 percent, mainly due to a decline in output at potash mines as a result of lower foreign demand for fertilizer, while utilities declined by 1.6 percent as unseasonable warm weather led to lower demand for electricity.

USDCAD1-minute Chart: March 2, 2012

Chart createdusing Strategy Trader – Prepared byTzu-Wen Chen

In the minutes after the data release, the loonie fell against the U.S. dollar on the news of the slowing Canadian economy. Interestingly, fourth quarter growth in Canada was much slower than in the U.S. where GDP grew by 2.8 percent. The Canadian dollar fell 14 pips before retracing back towards the levels seen before the data release. At the time of this report, the USDCAD pair was trading around 0.9870.

--- Written by Tzu-Wen Chen DailyFX Research
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/market_alert/2012/03/02/Loonie_slides_as_Canadian_GDP_slows_in_fourth_quarter.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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