Newspaper article The Canadian Press

Economy Slows to 2.4% amid Late 2014 Oil Plunge, but Still Better Than Expected

Newspaper article The Canadian Press

Economy Slows to 2.4% amid Late 2014 Oil Plunge, but Still Better Than Expected

Article excerpt

Canadian economy slows to 2.4% in late 2014

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OTTAWA - The gears of the Canadian economy outperformed expectations to pump out a 2.4 per cent annual growth rate in late 2014 -- but experts warned Tuesday the economic brunt of the oil slump still lies ahead.

The annualized rate for the final three months of the year came close to the Bank of Canada's 2.5 per cent prediction and beat economists' consensus call of 2.0 per cent, according to Thomson Reuters.

Experts said this latest batch of data, released Tuesday by Statistics Canada, revealed some early signs that cheaper crude has damaged the economy.

The package also arrived one day ahead of a much-anticipated decision: the Bank of Canada's interest rate announcement.

The central bank stunned markets in January when it dropped its key rate by a quarter of a percentage point to 0.75 per cent. At the time, bank governor Stephen Poloz said the cut would buy insurance amid low crude prices that were "unambiguously negative" for the economy.

Last week, Poloz said the rate decrease bought the bank some time to assess the impact of oil's decline and dropped hints he will stand pat on the rate -- for now.

CIBC chief economist Avery Shenfeld said Tuesday that, even with the latest Statistics Canada numbers, another rate decrease will depend on whether Poloz wants to wait for more information about the extent of the economic damage from low oil.

"The downward spiral in oil sector capital spending and employment won't really show up until we're likely into even the second quarter of 2015," said Shenfeld, who's expecting Poloz to trim the key rate either Wednesday or at next month's policy meeting.

"So, it's helpful to know where the economy stood before that really hit, but it's not going to tell much about where we're headed."

Led by gains in manufacturing, Tuesday's data release showed the gross domestic product moved upward in December by 0.3 per cent compared to the previous month. That increase beat economist expectations of 0.2 per cent.

But the economy still cooled in the final months of 2014 after registering 3.2 per cent growth for the third quarter, the Statistics Canada report said. …

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