Gross Domestic Product stalled unexpectedly in April after seven consecutive monthly increases as retail and manufacturing dropped, Statistics Canada reported this week.*

At the same time, retail trade fell 1.7% during the same month, following a 1.9% gain in March. Together with smaller declines in manufacturing and utilities were offset by increases in mining, wholesale trade and, to a lesser extent, the public sector and construction.

Nonetheless, it is widely believed that the Bank of Canada will probably raise rates for a second straight time at its July 20 meeting.

Mark Carney had already warned in April that the economy’s rebound from the crisis would slow significantly starting in the second quarter as the housing market was beginning to cool, the dollar was trading near parity with its U.S. counterpart and the impact of government spending was fading.

Those factors, and the arguably more dominant headwinds from Europe and the United States as the these fragile advanced economies walk the tightrope from stimulus spending to deficit-cutting, have kept the central bank insisting that nothing about its path to a more normal monetary policy is “pre-ordained from here forward.”

“The Bank of Canada will take all of this into consideration, including what’s happening in global financial markets, before making its decision,” Krishen Rangasamy, an economist with CIBC World Markets in Toronto, said in an interview. “If you see the stock market plunge 500 points the day before the decision, that may change things. But if we don’t see something like that, if financial markets stabilize, then there’s no reason for the bank to pause in its tightening.”

* The monthly gross domestic product (GDP) by industry data at basic prices are chained volume estimates with 2002 as their reference year. This means that the data for each industry and aggregate are obtained from a chained volume index multiplied by the industry’s value added in 2002. For the 1997 to 2006 period, the monthly data are benchmarked to annually chained Fisher volume indexes of GDP obtained from the constant-price input-output tables.

For the period starting with January 2007, the data are derived by chaining a fixed-weight Laspeyres volume index to the prior period. The fixed weights are the industry output and input prices of 2006. This makes the monthly GDP by industry data more comparable with the expenditure-based GDP data, chained quarterly.

Related posts:

1. Forecasting Interest Rates Boyd Erman Globe and Mail Update After a year of making it easy by telling the market exactly what the Bank of Canada would do with borrowing costs by giving a commitment to keep them at emergency lows, Governor Mark Carney has rapidly switched tacks. The country’s top central banker is now confounding those who [...]...
2. April Issue of CAAMP Stats Bank of Canada Interest Rate January 19, 2010 0.25% March 2, 2010 0.25% April 20, 2010 Next meeting date Source: Bank of Canada Bank Prime Lending Rate January 20, 2010 2.25% March 3, 2010 2.25% April 21, 2010 Next meeting date Source: Bank of Canada Conventional Mortgage – 5 Year Rate* March 10, 2010 5.39% [...]...
3. Bill Gross: “I would prefer to invest money in Canada” Bill Gross, founder and managing director of Pacific Investment Management Co., which manages US$1-trillion on behalf of clients, said in his monthly letter to clients that Canada stands out among industrialized countries as a destination for investors to park their fixed-income cash. “Given enough liquidity and current yields, I would prefer to invest money in [...]...

Tags: Bank of Canada, financial markets, GDP, Gross Domestic Product