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GDP expected to lag U.S. growth Add to ...

Here's Allan Robinson's At The Bell which you'll find in Friday's newspaper: The Canadian economy looks like it will be lagging the growth rate south of the border if today's gross domestic product forecasts prove to be correct. WHAT ARE THE EXPECTATIONS? The domestic economy in the first quarter of 2008 is expected to have increased at an annual rate of 0.4 per cent, compared with 0.8 per cent in the fourth quarter, according to a survey of economists by Bloomberg. The slowdown comes as the U.S. economy is growing at an annual rate of 0.9 per cent, which is sluggish, but it would still be more than twice the domestic rate. The Canadian economy is growing at the slowest pace since the severe acute respiratory syndrome health crisis tainted the second quarter of 2003, said Michael Gregory, a senior economist with BMO Nesbitt Burns Inc. Mr. Gregory expects the pace of both consumer spending, which reached a 23-year high of 7.4 per cent during the fourth quarter, and government spending will decline by about one-half. Construction and spending on machinery and equipment continues to be strong as companies push for higher productivity to offset the high dollar and rising commodity costs, he said. Although Canadians are selling slightly more oil and gas by volume, most of the gain has been made as a result of higher prices. "Since much of the machinery and equipment is imported, and most of the measured gain in trade during the period was a result of higher energy prices, real net exports should still exert a tiny drag on GDP growth in the first quarter," Mr. Gregory said. Canada is shipping "fewer cars and widgets and everything else" to the United States, whereas south of the border exports are strong, Mr. Gregory said. Nevertheless, energy prices are creating wealth in Canada and that is helping to keep consumers and the domestic economy healthy, he said. "We are producing less, but it's worth a lot more and we are getting rich as a country." Still, the shares of retail companies like Canadian Tire Corp. Ltd. and Shoppers Drug Mart Corp. have been weak. "The gap is that people are worried that the next thing to happen is that the consumer will slow down in Canada in the second half of the year," said Kate Warne, Canadian market strategist for Edward Jones & Co. "We see this as an opportunity [to buy]rather than something to be concerned about."

 

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