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A shopper looks at washers and dryers at a Home Depot (SHANNON STAPLETON)
A shopper looks at washers and dryers at a Home Depot (SHANNON STAPLETON)

Economy gets boost from financial sector Add to ...

The so-called FIRE sectors - finance, insurance, real estate - are fuelling Canada's economic expansion.

The services industries are propelling the country's economy, which in November rose at the fastest clip in eight months, while the performance of the goods-producing side is uneven.

"The financial services sector is doing considerably better than we, and others, had forecast," said Stewart Hall, economist at HSBC Securities (Canada). As a whole, "the economy is performing moderately better than expected."

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Canada's gross domestic product expanded 0.4 per cent in November, Statistics Canada said on Monday, topping expectations and doubling the pace of the previous month.

Mining continued to grow, while the performance of the financial, real estate and insurance industries, which account for 20 per cent of GDP, was the primary driver in beating the forecasts.

Manufacturing and construction, in particular, subtracted from growth. But momentum may pick up into the first quarter, as U.S. demand stabilizes and Canadian auto plants ramp up after temporary closings, economists said.

The Canadian economy has expanded in three of the past four quarters, which "clearly indicates that the slowdown we had in both GDP and jobs in the summer is over," said Philip Cross, Statscan's chief economic analyst.

The report highlights the economy's continuing shift toward the services side. Services now account for 72 per cent of Canadian output, compared with 28 per cent for goods production.

Growth on the services side was also helped by retail and wholesale sales. On the goods side, results were mixed. Construction is slowing in line with weaker demand in the housing market, though the mining sector has expanded 9.3 per cent over the past year, Mr. Cross noted. "This is a sector doing extremely well," he said.

Activity among real-estate agents and brokers increased 7.6 per cent, the fourth monthly increase in a row, though the sector's output remains 8 per cent below levels recorded last April, Statscan said. The finance and insurance sector rose 0.7 per cent on higher volumes of trading in stock exchanges, as well as personal lending and mortgages.

On the trade side, companies said they're expecting external demand will grow this year. "I think it's going to be a decent year [for demand]from the U.S.," as well as China, said Brad Miller, president of Chilliwack, B.C.-based IMW Industries Ltd., which makes industrial equipment.

Like other exporters, he's feeling the pinch of the strong Canadian dollar. "It's a huge, huge challenge. Every time we gain efficiencies, or invest in technology, or do something good, the dollar takes the wind out of our sails and puts us back to work."

Mr. Miller isn't the only one fretting about the currency. The Bank of Canada said this month it still sees "considerable slack" in the economy, which it doesn't expect will return to full capacity until the end of 2012. Governor Mark Carney said last week he was concerned about the strong Canadian dollar and its impact on exporters.

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