The Canadian economy grew at a 1.9 per cent rate in the first quarter of 2012, as growth in consumer spending slowed and business investment accelerated. Economic growth fell short of Bank of Canada expectations of 2.5 per cent though a pick up in second quarter growth may compensate for that shortfall. We are forecasting that the Canadian economy will expand at a 2.4 per cent rate this year.
Today's GDP release probably makes the Bank of Canada's case for a rate increase more difficult, particularly given ongoing developments in the Euro-zone. We expect the Bank to hold its overnight target rate at 1 per cent at its next interest rate meeting on June 5 while also walking back the hawkish tone from its April rate decision.
The US labour market continued to tread water in Ma following a strong first quarter of employment growth. Today's US non-farm payrolls report showed just 69,000 new jobs were created in May, following a downward revision to April employment growth to just 77,000. The US unemployment rate ticked 0.1 points higher to 8.2 per cent.
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