3-2-18 9:54 AM EST | Email Article
By Kim Mackrael 

OTTAWA -- Canada's economy expanded at a slower pace than expected in the fourth quarter, as higher imports and weaker inventories dragged on growth.

Canada's gross domestic product, the broadest measure of goods and services produced in an economy, rose at a 1.7% annualized rate in the quarter, to $1.87 trillion Canadian dollars ($1.46 trillion), Statistics Canada said Friday.

Market expectations were for a 2% advance, according to economists at Laurentian Bank Securities, while the Bank of Canada had earlier forecast a 2.5% gain.

In comparison, the U.S. economy advanced 2.5% in the final three months of 2017.

For 2017, Canada's economy grew 3%, ahead of the 1.4% expansion recorded in the previous year. The Bank of Canada had earlier estimated 2017 growth at 3%.

On a month-over-month basis, GDP rose 0.1% in December, matching market expectations. November's GDP advanced 0.4% from the previous month.

December's expansion was based on increases in the real estate and rental sector, the public sector, and finance and insurance, which outweighed declines in wholesale and retail trade.

The Bank of Canada raised its benchmark interest rate three times during the past year, to 1.25%, and indicated in January that it expects the economic outlook to warrant further increases. However, it also said it would take a cautious approach on rates given uncertainty over the future of the North American Free Trade Agreement and the impact of new mortgage-financing rules.

The fourth-quarter report indicated that business investment was the top contributor to growth, rising 2.3% on a nonannualized basis. Investment in residential housing advanced 3.2%, following a flat third quarter. Ownership transfer costs rose 9.3% in the quarter, indicating a bump in resale activity before new mortgage-financing rules came into effect at the beginning of 2018.

Household spending rose 0.5% on a nonannualized basis, compared with a 0.9% gain in the previous three-month period.

Exports of goods and services rose 0.7% on a nonannualized basis in the quarter, after recording a 2.7% decline in the previous period. Imports advanced 1.5%, up from 0.1% in the previous quarter.

In calculating Canada's GDP, Statistics Canada deducts imports to arrive at a level of domestic production. That means the fourth-quarter increase in imports was a drag on GDP.

Businesses accumulated C$13.81 billion in inventories in the fourth quarter, with manufacturers, retailers and wholesalers adding to their stocks.

Write to Kim Mackrael at kim.mackrael@wsj.com


(END) Dow Jones Newswires

March 02, 2018 09:54 ET (14:54 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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