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GDP report expected to show bounce, but exports still ‘Achilles’ heel’
morning business briefing
Michael Babad
Michael Babad

This article was published more than 10 years ago. Some information may no longer be current.

These are stories Report on Business is following Friday, Nov. 29, 2013.

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How GDP fared
This report on how Canada's economy fared in the third quarter is expected to show a nice bounce, but observers warn that trade remains a sore spot.

As BMO Nesbitt Burns put it recently, the country's "persistently weak exports have been the Achilles' heel of the Canadian economy."

Economists expect this morning's report from Statistics Canada to show that gross domestic product expanded in the quarter by somewhere in the area of 2.3 per cent to 2.8 per cent at an annual pace, better than the second-quarter showing of 1.7 per cent.

Here's what economists expect to see at 8:30 a.m. ET:

"Canada's economy gained a little momentum in the third quarter, with a rebound from the Calgary floods and Quebec construction strike providing a lift after weighing on the prior quarter. Housing looks like it's going to add to growth for a second straight quarter, defying broad-based expectations for a slowdown. Consumer spending growth is expected to moderate from Q2's 3.8-per-cent surge, as auto sales held at strong levels but didn't climb to new heights … Net exports are expected to be the real weak spot in this report, carving more than 1 percentage point from the headline." Benjamin Reitzes, BMO Nesbitt Burns

"Our expectation that overall GDP growth rose at a 2.8-per-cent rate in Q3 is driven largely by solid gains in monthly GDP growth of 0.6 per cent and 0.3 per cent in July and August, respectively, as well as our monitoring that monthly GDP rose a further 0.3 per cent in September. The volume of September manufacturing sales increased a solid 1 per cent, a gain that is likely to be mirrored in the manufacturing component of GDP.  Wholesale trade volumes increased 0.2 per cent in September and strong auto sales boosted retail sales volumes by 1 per cent in the month. We expect some further support will come from rising construction spending, in part reflecting continued rebuilding following June flooding in Alberta. The 1.9-per-cent gain in mining output recorded in August is unlikely to be repeated to the same extent in September although indications that potash production rebounded following a 5.6-per-cent drop in August as well as further modest gains in oil drilling activity will also prevent a decline in the component." Paul Ferley, Royal Bank of Canada

"While consumer spending likely cooled, other sectors saw upside. Private non-residential investment in structures got a one-time boost as activity restarted following the Quebec construction strike. And public infrastructure investment also rose, with spending on educational facilities accelerating, according to a StatCan survey. Public consumption spending was probably up, based on hefty hiring in public admin/social services. New and existing residential construction also increased, and housing resale activity, counted under residential construction as 'ownership transfer costs,' was again a big plus for GDP." Emanuella Enenajor, CIBC World Markets

"Domestic demand is expected to have led the way again in Q3, supported by a pick-up in Canada's oil patch and residential investment. Business investment is expected to have rebounded from its contraction in Q2, and largely reflects stronger non-residential construction. Import data suggest machinery and equipment outlays were soft, consistent with the muted tone of business investment intentions in the Bank of Canada's latest outlook survey." Leslie Preston, Toronto-Dominion Bank

Markets mixed
Global markets are mixed so far this morning as U.S. investors return for a shorter trading day after their Thanksgiving holiday.

And, with Black Friday all the rage, we'll see how American retailers are faring.

"Black Friday should bring retailers to the fore today," said Craig Erlam of Alpari.

"Any indication that the recent drop in consumer sentiment in the U.S. is encouraging them to avoid these sales could be seen as a sign that Christmas sales as a whole will be disappointing," he added in a research note.

"Given the popularity of Black Friday in the past, this seems unlikely, but investors will certainly be watching this with interest throughout the day."

Tokyo's Nikkei slipped 0.4 per cent, but remember just how high it's riding, while Hong Kong's Hang Seng gained 0.4 per cent.

In Europe, London's FTSE 100, Germany's DAX and the Paris CAC 40 were up between 0.1 per cent and 0.4 per cent by about 8 a.m. ET.

Dow Jones industrial average and S&P 500 futures also rose.

Attention shoppers
And, on that note, here's my take on Black Friday madness, with apologies to Carl Douglas, who had a one-hit wonder in 1974 with this novelty song:

Everybody was Kung Fu fighting
Those kicks were fast as lightning
In fact, it was a little bit frightening
But they fought with expert timing

"Black Friday in America will no doubt see shops packed to the rafters as the U.S. spends following the Thanksgiving festivities," said market analyst Alastair McCaig of IG in London. "This barometer of retail spending power  will be closely monitored as analysts try to gauge the likely spend over the month of December."

Japanese prices climb
Chalk up another win for Abenomics.

Named for Prime Minister Shinzo Abe, whose team came into power with a pledge to juice Japan's economy and end a long spell of deflation, Abenomics has been working in fits and starts.

Today, however, the key reading on consumer prices showed inflation running at its fastest in some 15 years.

That measure, which strips out energy and food costs, was 0.3 per cent in October.

Industrial output also gained, while Japan's jobless rate came in at 4 per cent for October.

"Tiny steps," said senior economist Jennifer Lee of BMO Nesbitt Burns. "But all in, Abenomics is still working. You won't see it every month, but so far, it is working."

Euro economy looks brighter
Rising prices are also fuelling hopes in the euro zone, as is marginally lower unemployment.

According to the Eurostat agency today, inflation in the 17-member monetary union ticked up to 0.9 per cent in November, compared to the 0.7 per cent of October that fueled fears of deflation.

"However, this is not yet the end of the disinflation story in the euro area, as we believe the euro area [harmonized index of consumer prices] should decelerate moderately in Q1 2014 and then average 1 per cent next year and 1.4 per cent the year after," said Herve Amourda of Société Générale.

"For the monetary policy makers due to meet next week, the price developments of November should not trigger any policy action."

The region's unemployment rate, meanwhile, dipped to 12.1 per cent from 12.2 per cent. That, however, masks the diverse nature of the labour market across the 17 countries.

Fire hits factory
A massive blaze apparently set by angry workers swept through a garment factory outside Bangladesh's capital, The Globe and Mail's Bertrand Marotte reports.

The fire is the latest in a series of incidents – including the collapse of an eight-storey factory that killed more than 1,100 people in April – related to troubles and strife in Bangladesh's apparel sector.

There were no reports of death or injuries in the fire that was reported Friday at a 10-storey building in Gazipur, 40 kilometres north of Dhaka.

A Reuters photographer on site said burnt garments found at the scene sported brand names from U.S. retailers such as American Eagle Outfitters Inc., Gap Inc. and Wal-Mart Stores Inc. Brands for Sears Canada Inc. were also spotted, according to Reuters.

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