First, despite the apparent competitive crimp from a booming currency, Canada’s current account deficit was sliced 35% in Q4 to a $44.2 billion annual rate, and relative to GDP, down to a totally manageable 2.7% from 4.2% in Q3.
Second, Canadian real GDP growth came in at +3.3% at an annual rate in Q4, not only above the 3% expected by the consensus but besting the newly revised +3.2% print in the United States. The bottom line is that Canada has managed to achieve this without blowing its brains out on fiscal policy or jeopardizing the sanctity of the central bank’s balance sheet as has been the case stateside.
Moreover, it is clear that the housing sector, which initially propelled the Canadian economy out of its torpor, has successfully passed the baton over to the consumer and business sector. Consumer spending, in real terms, accelerated to a 4.9% annual rate from 2.7% in Q3 and 1.9% ― the best performance since the fourth quarter of 2007. While capital spending growth did flatten we also saw a huge revival in non-residential construction ― a +21% annual rate in what was the largest increase in nearly 14 years.
We also saw a +0.5% MoM print for December Canadian real GDP, which was the strongest advance in about a year and lends credence to the view that the economy is advancing at a pace that is around 3.5% this quarter too, which likely will outpace the U.S.A. again. The Bank of Canada is very likely going to be lifting its economic forecast after today’s numbers. We are not convinced Mr. Carney is tightening anytime soon but markets may feel differently about that.
---ibid (NB - Rosenberg is a Canadian)