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The high and low points in Canada's slowing recovery Add to ...

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Canada's recovery slows Canada's economic recovery is slowing rapidly after the dramatic post-recession rebound, pulled down by softer trade and the pullback in the housing market. But there's still some good news in today's report on gross domestic product from Statistics Canada.

Overall, the federal statistics gathering agency said, economic growth slowed to an annual pace of just 1 per cent in the third quarter of the year. That's down sharply from 2.3 per cent in the second quarter and also well below the 2.5-per-cent pace in United States.

"In a nutshell, this result is a clear disappointment, especially after the surprisingly perky growth rates seen earlier this year," said BMO Nesbitt Burns deputy chief economist Douglas Porter.

"In hindsight, it looks like the economy borrowed all the growth from the second half of the year and put it in the first few months of 2010. Bottom line for the Bank of Canada - there's zero rush to raise rates again."

Toronto-Dominion Bank economist Diana Petramala agreed, saying she believes the central bank will not raise interest rates again until at least the third quarter of next year.

Exports fell 1.3 per cent and investment in housing at a similar rate.

But consumer spending, so key to the recovery, is still going relatively strong, the agency noted, gaining 0.9 per cent in the third quarter. And businesses are investing in their plants and equipment, at a pace of 4.6 per cent, a good sign for productivity.

"This was the third quarterly increase in 2010, and the first time that quarterly growth exceeded 4 per cent since 2005," Statistics Canada said.

But, as Mr. Porter noted, today's numbers "just go to show that it is a pipe dream to believe that business investment can lead the recovery."

Euro numbers highlight divisions Europe has quickly divided along two clear lines, the haves and the have-nots. Jobless levels, economic growth projections, and the pressures on government bonds highlight the post-crisis divergence, which complicates the efforts of a European Central Bank that is, by its very nature, running a one-size-fits-all monetary policy.

Jobless numbers released today by Eurostat, the EU's equivalent of Statistics Canada, show more than 23 million people out of work in October in the 27 countries that make up the group, almost 16 million of them in the 16 nations that share the euro. The jobless rate for the euro zone climbed to 10.1 per cent - the highest in 12 years - while the entire EU registered unemployment at 9.6 per cent.

Most striking, though, is the divergence. In the Netherlands, Austria and Luxembourg, unemployment is running at 5 per cent or less. In Spain, Latvia and Lithuania, it's between 18 per cent and more than 20 per cent.

Notable, too, are the changes. In Germany, the economic engine of the group, unemployment fell in October to 6.7 per cent from 7.5 per cent. Sweden and Finland also saw marked declines. On the other end of the spectrum are countries such as Greece, whose jobless level surged to 12.2 per cent from 9.2.

The unemployment numbers add to yesterday's economic projections that also show the region divided into two, and came as bond yields in the European basket cases surging, driving up government borrowing costs as the debt crisis grows ever deeper. That has also spread to corporate borrowing, The Financial Times notes.

"The euro's slide continues, weighed by a jump in Spain and Italy 10-year bond yields," said BMO Nesbitt Burns economist Benjamin Reitzes.

"After surging 25 basis points yesterday, Spanish 10-year bond yields are up 7 basis points to 5.5 per cent (281 basis points above German Bunds, a euro lifetime high), while Italy 10-year yields are up 5 basis points to 4.69 per cent (200 basis points above German Bunds, also a euro lifetime high).

"... Markets are worried about Spain being too big to fail. Well, Italy is much bigger and carries a way larger debt. France and Germany can't pay for everyone's bailout on their own. The euro is going to continue to struggle until this situation is resolved, which will likely take at least a couple of months."

The weaker European economies are now caught in something of a vicious circle, Globe and Mail European correspondent Eric Reguly writes today. The are pushing ahead with aggressive austerity programs that will pressure unemployment and dampen growth, which in turn will hamper their deficit-fighting efforts.

AGF to acquire Acuity AGF Management Ltd. is acquiring Acuity, an investment management firm, in a cash-and-stock deal valued at $325-million.

The deal announced today will boost AGF's assets under management to $51-billion.

"In this era of consolidation, we have demonstrated our ability to increase scale and we are strongly committed to enhancing our presence at home and internationally as we pursue both organic and strategic growth opportunities," said AGF chief executive officer Blake Goldring.

EU probes Google The European Commission has launched an official probe into Google Inc. and its dominance of the Internet search market.

The EC said in a statement today that it has received complaints from competitors that the Internet search giant is allegedly abusing that dominance, but stressed that the investigation "does not imply that the commission has proof of any infringements."

"It only signifies that the commission conduction an in-depthy investigation of the case as a matter of priority."

Google said it would work with the European authorities.

India's growth surges The 'I' of the so-called BRIC countries is powering ahead, its economy surging and boosting inflationary pressures.

India's statistics agency said today that the country's economy expanded at a pace of 8.9 per cent in the third quarter. That's now three quarters in a row of growth above 8 per cent.

"Household consumption and business investment provided the most headline support, as did a mild monsoon season," said Scotia Capital economists Derek Holt and Gorica Djeric. "Today's results suggest that the Reserve Bank of India is likely to continue to tighten monetary policy, in hopes of taming inflation. Consumer price inflation is currently at 11.6 per cent year over year, partly due to high food prices."

The other BRIC countries are Russia, India and China.

Japan struggles Japan, on the other hand, is not so lucky. Industrial production dipped 1.8 per cent in October and the jobless rate rose to 5.1 per cent as the country continues to struggle.

"The labour force has decreased by 660,000 persons, or 1 per cent, over the last year," said Carl Weinberg, chief economist at High Frequency Economics.

"Japan's work force is shrinking, and therefore potential output is going down, too. The ratio of job openings to job seekers rose slightly, to 0.56 from 0.55 in September. This means there are still almost two unemployment persons looking to fill every available job, and the odds are not improving significantly.

Economists believe these numbers, coupled with others, suggest Japan is slipping back into recession.

"Overall, the data were weak but could have been worse," said BMO Nesbitt Burns economist Benjamin Reitzes. "Even so, there's nothing here to dissuade us from looking for a contraction in fourth-quarter real GDP."

From today's Report on Business

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